Most of us pay for some form of insurance even if the only policies we have are those which are legally mandatory as a result of some activity we undertake, like running a professional business, or motoring. Many people have in addition extra policies which they decide to pay for in order to cover some risk which they find worrying in terms of their ability to meet a cost unexpectedly. The principle of insurance can be described as spreading risk over time and between a pool of insured people.
The lower a person’s income, the more they are likely to need these non-mandatory policies in order to be assured that they will not suffer unaffordable losses. If your available income after paying for necessities such as food and household bills is low, it becomes essential to provide for the unexpected, which today includes negligence claims in respect of your home for example.
The feeling of security can prove to be illusory if as so often happens, the cover provided by the policy is not all that the insured person had believed it was, when the accident happens which puts it to the test, and it comes to making a claim. Sometimes there are exceptions to cover, for example certain sorts of legal liability are typically wholly excluded. Sometimes there is a part of the claim which falls to be paid by the insured person, and is not itself affordable. Sometimes the amount of cover is insufficient.
As a result of these issues, which can defeat the whole purpose of insurance, the ‘umbrella’ policy has come into being. These policies provide cover for those parts of the subject matter which are excluded by the principal umbrella policy; they allow claims for the extra payable when cover is too limited. Ideally they mean that one can arrange matters so that the financial consequences of an unexpected claim are no longer a source of any anxiety at all.
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