Your dog gets loose and crosses paths with your neighbor, knocking her over. She claims damages greater than what your home insurance policy covers—and now you may have to pay out of pocket to cover the rest, and your home insurance premium may rise.
That’s just one of many scenarios in which the costs exceed the coverage from your auto, home or renters insurance policies. So, what can you do? Consider getting an umbrella insurance policy. Here’s what you should know:
What’s an umbrella insurance policy?
An umbrella policy protects you when you’re liable for injuries or property damage that exceeds the liability limits on your home or auto insurance. It’s usually available in amounts beginning at $1 million, and the premiums are reasonable—often less expensive than simply increasing the liability coverage limits on your existing insurance policies.
How does an umbrella insurance policy work?
Suppose your home insurance policy covers you for up to $500,000 in liability damages. When you buy a $1 million umbrella policy, it will cover liability damages that go over your home insurance limit, meaning you’re covered for up to a $1.5 million liability claim.
Why is an umbrella insurance policy important?
An umbrella insurance policy through AAA can protect your assets (including a house) or future income, both of which could be targeted in an expensive liability lawsuit. It’s especially important if you’ve increased your liability risk, such as adding a swimming pool or having a teen who recently started driving.