In case your existing insurance policy does not cover situations like lawsuits, you can take advantage of special instruments called umbrella insurances. Umbrella insurances are specifically designed to protect the policyholder from major claims and lawsuits that could potentially bankrupt the policyholder.
What is Umbrella Insurance?
Broadly speaking, umbrella insurance is personal liability insurance triggered in situations when a policyholder finds themselves liable for a claim that cannot be covered by typical homeowners or vehicle insurance. What makes umbrella insurance stand apart is that it even covers certain liability claims that the other policies tend not to cover. Umbrella insurances cover claims such as libel, slander, and false imprisonment.
What are the benefits of buying an umbrella insurance policy?
An umbrella insurance policy not only ensures your peace of mind but also makes you feel additionally secure apart from your normal insurance policies, benefitting you in the ways mentioned below:-
- Additional coverage for other claims including slander, libel, false arrest, the liability protection on rental units, etc. These claims aren’t usually included in insurance policies other than the umbrella policy.
- Policyholders will be able to buy these policies at cheaper rates if bought from the same insurance company as the other insurance policies, providing you additional security without having to worry about exhausting your original claim limit.
- The umbrella insurance policy provides you with a ‘duty to defend’ form. This means that the policyholder will defend the entire claim amount even if the policy coverage is only partial.
- The policy also provides broader coverage on various primary insurances.
How does the umbrella insurance policy work?
While on first glance, you may find the umbrella insurance policy a waste of money and just protection of protection. However, this policy will surely be helpful for the policyholder in these ways:-
- Due to any unfortunate circumstance, if the policyholder ends up exhausting their liability claims under Home or Vehicle Insurance, additional protection will be offered by the umbrella insurance policy.
- An umbrella insurance policy will provide you protection from cases of false arrest, slander, or libel by providing compensation for these claims, which no other insurance policy provides.
What does an umbrella insurance policy cover?
Broadly speaking, the umbrella insurance policy covers:-
- Damages to your physical assets or properties
- Lawsuits and legal processes of some categories
- Protection against libel, slander, or any cases of false imprisonment.
- Prosecution with any intent of malice against you
- Bodily Injuries Liability:- Injury to another individual due to a fault from your end. In the given below circumstances, the medical bill of the third party individual will be covered by the umbrella insurance policy:-
a) Any accidents due to your vehicle
b) Injury inside your house
c) Injury by your pet
d) Injury to a child while playing on your property
- Property Damage Liability:- Covers any costs incurred in scenarios of damages to another individual(s) property due to circumstances like an accident, or mishandling of belongings by family members or pets. Any damages to the property of your child’s school by your kid can also be covered by this policy.
- Landlord protection against any possible liabilities.
What does an umbrella insurance policy not cover?
Any liabilities that are caused due to the following situations will not be covered by the umbrella insurance policy:–
- Any obligation that is required to be fulfilled by the Worker’s Compensation Law
- Any damages caused due to asbestos exposure
Example of an Umbrella Insurance Policy
Consider the following situation to understand the real-life example of an umbrella insurance policy. Let's say a driver runs past a red light and ends up accidentally hitting another car. There is a very high possibility of having caused major damage to the other vehicle and having third-party individuals injured.
If the expenses of the vehicle damage total ₹2,00,000 and the expenses of the injury treatment reach ₹20,00,000, there is a high probability that the driver will be unable to pay for all the expenses himself or have them covered from his insurance policies. In such a scenario, he will be rescued by his umbrella insurance policy that picks up additional liability costs that go far beyond the original insurance coverages.
Which companies offer umbrella insurance policies in India?
As of August 2021, only Tata AIG General Insurance Corporation offers the umbrella insurance policy in India. This insurance provider is a collaboration between the Indian conglomerate Tata Group and the multinational American Insurance Group (AIG). However, it is very likely that Indian insurance companies will start offering umbrella insurance policies to their customers in the near future, as both the policyholders and insurers understand the importance of having such a policy to protect the policyholders from further financial crises despite an existing policy.
The umbrella insurance policy helps cover claims that may not be covered in other insurance policies or claims where the compensation covered by other policies is not enough. In the grand scheme of things, the premium paid for this policy is very affordable compared to the drastic scenario of being in a financial disaster due to a freak accident or a malicious false case against you.