As we go through life, we tend to accumulate more and more assets. Whether it’s a new home, a new car, or even a new hobby that involves expensive equipment, the things we own often become an extension of our identity. Unfortunately, as our assets grow, so does our potential liability if something goes wrong. That’s where excess liability coverage comes in – a type of personal insurance that provides added protection when your standard liability insurance isn’t enough.
What is Excess Liability Coverage?
Excess liability coverage, also known as umbrella insurance, is a type of insurance policy that provides additional coverage beyond the limits of your standard liability insurance. This type of coverage is designed to protect you financially if you are found to be liable for damages that exceed the limits of your primary insurance policies, such as home, auto or watercraft insurance. Essentially, excess liability insurance helps ensure that you won’t be responsible for the full amount of damages if you are sued.
Why People Overlook Excess Liability Coverage:
Despite its importance, excess liability coverage is often overlooked or ignored. There are several reasons for this, including:
- Lack of Awareness: Many people are unaware that excess liability coverage exists and don’t realize that their standard policies may not be enough to fully protect them in the event of a lawsuit.
- Belief that They Are Not at Risk: Some people mistakenly believe that they are not at risk of being sued or that their standard insurance policies are enough to cover any potential claims.
- Cost: Adding an excess liability policy to your existing insurance can increase your premiums, which can be seen as an unnecessary expense.
Why Excess Liability Insurance is Essential:
The truth is that excess liability coverage is an essential component of any personal insurance portfolio. Here are a few reasons why:
- Financial Responsibility: If you are found to be liable for damages, you are financially responsible for them. Excess liability coverage helps ensure that you can meet your financial obligations if the damages exceed the limits of your standard policies.
- Asset Protection: The more assets you own, the more you have to lose in a lawsuit. Excess liability insurance can help protect your assets and your financial future.
- Peace of Mind: Knowing that you have coverage beyond your standard policies can give you peace of mind and help you sleep better at night.
I’d like to share a story with you. John and Susan had always been financially responsible and made sure to have the necessary types and amounts of insurance coverage. They had homeowners, auto, and life insurance, and felt confident that they were adequately protected. However, when their son was involved in a near fatal car accident that resulted in multiple injuries, they found that their auto insurance policy was insufficient to cover the significant medical bills.
Fortunately, they had also invested in an excess liability/umbrella insurance policy, which provided an additional layer of protection beyond their existing policies. This coverage kicked in and helped to cover the medical expenses, as well as any potential legal expenses resulting from the accident.
Without the umbrella insurance policy, John and Susan would have been left with exorbitant out-of-pocket medical costs that could have drained their savings and investments, negatively impacting their financial security and their futures. The excess liability coverage saved them from financial ruin and allowed them to focus on their son’s recovery.
This is just one example of how umbrella insurance can be a critical safety net in the event of an unexpected and potentially catastrophic situation. You’ve worked hard for what you have. So much could be lost in a moment. It’s not only the best choice, but also a responsible one to protect your assets and more importantly the ones you love most.
Excess liability coverage offers added protection and peace of mind that standard liability insurance may not provide. It’s important to evaluate your risks and assets and consider adding an excess liability policy to your personal insurance portfolio to ensure you’re fully protected.
JoAnna Laiscell, July 25, 2023
References:
- NerdWallet – https://www.nerdwallet.com/blog/insurance/umbrella-insurance-explained/ NerdWallet’s article on umbrella insurance offers insights into why this type of coverage is often overlooked and why it’s important to consider adding it to your insurance portfolio.
