Purchasing enough Homeowners Insurance is essential since in the event of a total loss you want to receive an adequate coverage to rebuild your house and replace its contents and protect yourself in case someone gets injured on your property and sues you.
Assess your own insurance needs carefully. The amount of coverage you need is largely based on your location, the number of rooms in your house, the size of your mortgage and other factors. Make sure you have enough coverage including compensation of 100% of the replacement cost of your property, the contents of your house, the costs of living elsewhere in case your home is uninhabitable, and your liability to others.
However if you own a property or have investments and savings that are worth more than the liability limits under your policy, consider purchasing an Umbrella or Excess Liability policy, which will provide extra liability coverage to protect your assets. It is not uncommon for people who are sued to have no extra coverage to protect their personal assets in the lawsuit. Being an additional layer of coverage, Umbrella or Excess Liability is used in the case there is a property damage or personal injury lawsuit, and your personal wealth could be in danger of a judgment.
An Umbrella or Excess Liability policy is not part of your Homeowners policy but makes a supplemental insurance coverage, which you have to purchase separately. It starts to pay when your basic policy has paid its limit on your claims and can protect you from serious expenses or even a financial catastrophe. In other words, an Umbrella policy is designed to fill in gaps in your coverage when the limits of your regular policy are already exhausted or you are sued for something that neither your Home nor your Auto Insurance provides coverage for.
Umbrella or Excess Liability offers broader coverage and covers for things which are not included under Standard Homeowners or Auto policies, such as libel, slander, and invasion of privacy. Besides your home and cars, Excess Liability can also be associated with boats, motorcycles, and other recreational vehicles.
Many insurance companies will offer you the Excess coverage only if you have both your home and vehicle already insured with them and maintain a certain level of liability on your Home and Auto policies. Normally, to qualify for Excess Liability it will require at least $500,000 of liability for your home, $250,000 of Bodily Injury Liability per person, $500,000 per accident, and $100,000 for property damage for your autos.
The cost of Umbrella policy depends on how much insurance you already have as well as on whether or not you represent any serious risk. This coverage is generally cheap, and the greater your underlying coverage, the cheaper the policy. Logically, the larger your basic liability limit, the less likely you will need any additional coverage and the lower your premium for Excess coverage will be.
In case you have $500,000 of Basic Homeowners Insurance coverage for dwelling and property damage, you will have to pay any amounts that exceed that specific claim limit out of your own pocket. High coverage protects from compensating any large sums at your own expense to replace destroyed property.
The amount of coverage depends on how much your assets are worth. For instance, if you have 5 million dollars worth of personal assets, you should get a 5 million dollar Umbrella Liability. You can buy as high as 10 million dollars worth of Excess coverage, since it still will be rather cheap. According to the Insurance Information Institute, $1 million of Excess Liability coverage costs between $150 and $300, and each additional $1 million of coverage costs less than $100.
If you have a mortgage loan, your home must be insured for its replacement cost and is likely to be fully covered. However you may fail to have the same protection in liability coverage and a liability lawsuit in case someone is injured while on your property may ruin you. An Umbrella policy for Excess Liability coverage is the salvation in this case.
Consult with your insurance agent on how much Homeowners coverage including liability you need. You may opt for contacting multiple agents in order to get an average amount of coverage you will have to purchase for your home.