Many don’t think of umbrella insurance as something they want or need. It could be because it is not as clear in its coverage as a life insurance or health insurance.

That is why it is important to know what umbrella insurance is, why it might be needed, and how much of it one should have. As with any other type of insurance, it would be wasting of money if you are not paying for the right coverage that comes through when needed. Here are a few questions and points to consider before buying such an insurance policy.

Typically, this is an extra insurance to cover a liability in the absence of any other insurance or one has exhausted the other liability coverage coming with the other insurance policies. For example, if in a car accident and you cause injuries to several people and cars, the umbrella insurance could kick in to cover the liability that goes beyond what an auto insurance covers. If a visitor falls down in your house, breaks a hip and requires extensive surgery. If you are deemed responsible for this accident, it is clear where the liability lies.

Having an umbrella insurance can save the day as well as any other property like a house or the car.

What does umbrella insurance cover?

This typically covers a range of liability issues — check what a particular provider offers, but in general it covers injuries, damage to property, lawsuits and personal liabilities resulting from situations that involve slander, mental distress, etc.

You only need one policy to cover any of these situations. But be realistic about what coverage is most important. For example, if you’re a tenant concerned about possible property damage, make sure that the policy covers this particular risk.

Millions of dirhams may sound like a lot in many contexts, but not when it comes to umbrella insurance. Think of situation where one runs out of other insurance or when you get sued and found to be liable. These are costly situations to be in and to protect the home, savings and other property, make sure to buy as much coverage as one can.

Get quotes from several insurance providers to see what they can offer and for how much. In addition, make sure to check the various costs related to the coverage, because after the first Dh1 million or so, you may be able to buy more such coverage at a lower cost.

Many insurance providers will have minimum and maximum amounts on the policies. But these are just guidelines. Consider the particular circumstances, the value of your assets, as well as the costs of potential risks.

Who needs umbrella insurance?

This is a good idea for almost anyone, if one can afford it. But it is not a must unless there are potential risks as a result of the profession you are in, the choice of lifestyle, etc. For example, if it involves volunteering, coaching children or a profession that carries a higher risk level.

For a homeowner, having umbrella insurance makes a lot of sense. This is one way of making sure that if caught in a situation where the liability exceeds what the insurance covers, there is no need to lose the home. While one may cringe at the additional cost of taking up umbrella insurance, think of it as a protection for those investments.

The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.

Umbrella insurance

Understand why you need extra liability coverage;

Know your own risks;

Find the right coverage and compare policies; and

Buy enough coverage for your situation.

— R.O.