What Happens If I Need To Buy More Insurance Later?

What Happens If I Need To Buy More Insurance Later?

What happens if I need to buy more insurance later? Want to know the answer headfirst? Umbrella insurance!

Umbrella insurance provides an extra layer of protection. When you exhaust the limit of, say, your auto insurance, then umbrella insurance kicks in. The remaining amount can be paid by umbrella insurance. And the best part? It is way cheaper than you think! Let’s see what umbrella insurance is and how it helps to buy more insurance later.

Let us begin!


What Happens If I Need To Buy More Insurance Later?— Umbrella Insurance

Umbrella insurance, as already described, raises your coverage limit. But it is exclusively a liability policy. Thus it kicks in when your auto insurance, homeowner’s insurance, or other policy’s liability limit is exhausted.

The coverage umbrella insurance provides is broad. It usually includes almost all types of policies until it excludes any in the agreement. But some companies do include only a few policy types. So do remember to read the fine print before entering into any contract. All said, there are still a few things that your umbrella insurance won’t likely cover:

  1. Because umbrella insurance is a liability policy, it does not cover damage to your property. For example, if your house or car is damaged, they will not pay you.
  2. Secondly, if you deliberately cause damage the property or bodily injure somebody, no policy will pay you. Yes, neither umbrella nor auto or homeowner’s policy.
  3. Thirdly, this policy does not cover business liabilities.
  4. Next, if you have agreed in paper to carry out liability, the insurance will not cover if anything goes wrong.
  5. Lastly, an umbrella policy will also not cover you in war-related damages. Well, neither will other policies. There are hardly any companies that cover war-related damages.


How Does Umbrella Insurance Work?

Umbrella insurance covers all types of liabilities. The lawsuit doesn’t need to involve your home or vehicle; it covers almost any kind of suit. Also, it covers a few of your family members too. But do remember to check the fine print for which family members the policy covers.

Umbrella policies also cover protection from malicious prosecution, invasion of privacy, and other related hazards.

Also read: What is Umbrella Insurance and How it Works?

Let us see a few examples to understand these provisions of the policy:

  1. Your son gets involved in a fight at school and injures the other boy. The boy’s parents sue you. In such a case, umbrella insurance will cover your son. Also, a school is not covered under any other policy like auto or homeowner’s insurance. Thus, this policy is an excellent deal.
  2. You are on an expressway and cause a multi-car accident. Now your auto insurance might not suffice the liability costs of all these vehicles. And here, umbrella policy steps in.
  3. You are out of town, and your child throws a party at the house. Let’s assume they take alcohol, and a friend hurts himself while drunk driving. His parents will sue you. Again an umbrella policy can be your savior.

From the above examples, we can say that umbrella policy has quite a broad coverage. It covers a whole spectrum of liability issues and also covers some of your family members.


An Example Of Umbrella Insurance Policy

Let’s elaborate on the multi-car accident we stated above.

Suppose you are driving on an expressway and cause a multi-car accident. Say four cars other than yours are involved in the accident. A couple of owners are injured, and all have damages on their vehicles. So, all of them decide to file a suit against you. And the jury goes in their favor and award a judgment of a total of $1,000,000 to them.

Now, your existing liability auto insurance covers you only till $300,000. So, the rest $700,000 you have to pay from your pocket. For most of us, this amount will have to come from our retirement fund. And this will take a heavy toll on our savings. You will have to work ten years more before you can retire or cut down on your expenses heavily. Both of these solutions require a lot of hardship and can ruin your financial planning.

But what if you had an umbrella insurance policy, you could easily pay for these expenses. You would not have to empty your retirement savings for that. Let’s say you have an umbrella insurance cover of $1,000,000. Then the remaining $700,000 will be given from that. The umbrella policy will also pay for the attorney fees and other lawsuit expenses. And the best part is these expenses are additional perks of the policy. Yes, they are not included in the initial $1,000,000.

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Also, let’s say your auto insurance deductible is $5,000. Then your auto insurance will pay you $295,000. And this umbrella policy will pay you the full $700,000. Yes, you do not need to pay a separate deductible.

But if your lawsuit does not lie in the scope of your auto or homeowner’s policy, then you will need to pay a deductible.


Cost Of An Umbrella Insurance Policy

As we said earlier, an umbrella policy is relatively cheap, especially when you consider its coverage. According to III, you can buy a $1,000,000 coverage from anywhere between $150 to $300. Want another million, then expect to pay approx. $75 more annually. And a third million will cost you $50 more. Affordable, isn’t it?

Also read: Is disability insurance necessary for Business Owners?

A thing to pay attention to is that you need to max out your liability limit of auto or homeowner’s policy. And only then can you buy an umbrella policy.



Next time you ask yourself what happens if I need to buy more insurance later, you know the answer. Umbrella insurance is an excellent idea for those at a higher risk or who have dangerous or expensive equipment.

So, this was all in our guide; we hope you got the answer to your questions. And if still any questions buzz, please drop them in the comments box. We reply ASAP.