Answering The Question: Do You Really Need Umbrella Insurance When You Have Home Insurance?

You may have recently heard the buzz phrase, "umbrella insurance" and wondered what it means. Why would anyone invest in a policy that covers (like an umbrella) everything listed under it? Why would anyone want umbrella insurance if they already have separate insurance policies covering their belongings and assets? Furthermore, do you really need umbrella insurance when you have home insurance, or is it just an extra expense you can do without? The answers to these questions follow.

What Umbrella Insurance Is, and What It Can Do

Umbrella insurance covers many of the financial losses and gaps left behind by primary policies. Depending on the providers in the umbrella policy, it may have its limitations, still leaving you with some expenses not covered. Some people use umbrella insurance in lieu of home insurance when the home insurance policies available to them cannot begin to cover everything the homeowner wants or needs coverage for. However, that can backfire as well, since an umbrella policy is not typically meant to act as the primary policy to cover your home. If anything, you may want to carry both regular home insurance and an umbrella policy on your house. Just be sure that the umbrella policy "drops down" (i.e., fills in for lack of) to cover whatever your regular policy does not.

Why You May Want an Umbrella Policy, Auto Insurance, Home Insurance, etc.

One of the features that makes an umbrella policy so handsome is that it not only covers the gaps in your home insurance, but also gaps in your auto insurance and other insurance policies. People who purchase this extra insurance do so because they live in a high-risk area or they live somewhere where natural disasters are quite common and occur annually. When anything you own is covered by its original policy and an umbrella policy, then you know you will be able to recoup most of your losses when disaster strikes.

Why You May Be Able to Do Without Umbrella Insurance

In many cases this extra insurance is, in fact, excess. In your case, it could very well be an added expense you can do without. For example, if you live in a suburb where crime rates are really low and natural disasters are null and void and your home is not situated on a flood plain, you would be paying too much for too much insurance and you can drop the umbrella policy. Your best determining factors for buying the extra insurance is to look at the area surrounding your home, check the crime rates and crime reports and examine natural anomalies in the wind and weather patterns. Then you can make an educated decision on whether or not your home insurance policy needs an accompanying umbrella policy.