The solution to a modern problem

Written by Admin on June 13, 2011 – 8:12 pm

The purpose of insurance is to protect both the insured person and third parties against certain defined risks. Sometimes, if a person is engaged in an occupation which could potentially cause substantial harm to others, examples being driving an automobile, or engaging in a skilled trade, there are enforceable rules to say that the person MUST be covered by an adequate insurance policy. That is obviously necessary so that members of the public, if harmed by the insured person’s activities, will at least be able to obtain financial recompense for such damage.

However it is important to realise that the standard umbrella insurance policies we take out are often insufficient to provide full cover. In the case for example of motor insurance, a law suit for millions of dollars may result in a personal claim against the individual at fault. If the cover they have bought is the minimum required by law, and is not financially adequate to meet the case then the individual may be pursued for the uninsured amount of the loss. Likewise household insurance may not be in a sufficient amount to pay for all the financial results which would ensue if somebody met with a fatal accident on your property.

It is to meet some of these difficulties that ‘umbrella’ insurances are designed. It would be expensive to increase the level of insurance on your principal policy, and umbrella policies provide a more affordable alternative. They provide cover to fill in the holes of the principal cover, as well as cases where cover is financially insufficient to meet a claim. They are taken out to supplement the liability part of a main policy, and if carefully chosen, ideally after receiving financial advice, then such a policy can bring about the result which is the aim of insurance in general, the freedom from worry about the effect of an accident on financial well-being.

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