An umbrella policy provides additional liability coverage beyond that of the insured’s auto, homeowners or flood policies. This provides additional protection for those who may be sued by others for damage to their property or injury caused in an accident. This insurance protects you against libel and vandalism. It will also cover slander and invasions of privacy.
A small business can also benefit from an umbrella policy in order to protect themselves against any potential financial damages that may arise due to claims.
If you purchase umbrella insurance from the same company that insured your auto, home or flood, the premium may be lower. Depending on the provider, a policyholder that wants to add umbrella insurance must have base coverage between $150,000 and $250,000 for auto, or $250,000 to $500,000 for homeowners.
Umbrella insurance can also be referred to as excess liability insurance. An umbrella policy can help pay for the damages if a policyholder’s liability limit is exceeded by their homeowners, car, or other insurance policies. If the policy’s dollar limit has been reached, an umbrella policy will act as a failsafe. This means that the insured does not have to use their savings or other assets.
What is umbrella insurance?
The umbrella policy provides liability coverage that extends beyond your existing insurance policies or may cover claims not covered by liability insurance. Umbrella liability insurance provides coverage for the following:
- Injuries
- Damage to Property
- Certain lawsuits
- Personal Liability Situations
Special Considerations
People who purchase umbrella insurance usually have expensive properties or significant savings. They may also own things that are dangerous and can cause injuries (such as trampolines, swimming pools, dogs, etc.). The person may also be involved in activities that can increase their risk of being sued, including:
- Landlording
- Coaching kids’ sports
- Being on a board of directors for a non-profit
- Volunteering
- Posting reviews regularly of businesses and products
- Sports where you can easily cause injury to others (skiing and surfing, hunting etc.).
Example of an umbrella insurance policy
Consider the following example to understand umbrella insurance. When a driver accidentally runs a red signal and hits another vehicle, the damage could be severe and multiple people may be injured.
If the car repair costs are $50,000, and the medical treatment for the injuries is more than $500,000, then the driver who was at fault could be responsible for expenses far exceeding the limits of his insurance. An umbrella policy will cover the extra liability costs above the limits of your car insurance.
How much does an umbrella policy cost?
According to the Insurance Information Institute, the annual cost of a $1 million personal umbrella insurance policy ranges from $150 to $300.
Of course, the actual cost of an umbrella policy depends on how much coverage you choose to buy, your location, the number and types of vehicles you own, if you own multiple houses, and other items. Our insurance agents can help you get a policy that fits your needs.
Do you need umbrella insurance?
The decision to purchase umbrella insurance is certainly driven by fear. Insurance companies claim that you need umbrella insurance because we live in a world where everyone can sue for anything.
In the news you can read about many personal liability horrors, in which juries handed out multi-million dollar judgments that the individuals were required to pay. How likely is it that you will find yourself in a similar situation? Do you need umbrella insurance at all?
Who could use umbrella insurance?
Maybe you already have homeowners and auto insurance that covers these situations. True! But umbrella insurance covers situations that are not covered by other policies.
Umbrella Policy Coverage Examples:
The bodily injury liability is the compensation for injuries that another person suffers as a result of an accident. Medical bills or liability claims resulting from injuries are examples.
- You’re responsible for a serious car accident
- Damage caused by your dog to other people (Restrictions apply, and not all animals or breeds are covered. Details can be obtained from your insurance broker.)
- The guest at your home may fall
- The neighbor’s child is injured while playing in your yard
The cost of damage to tangible property is covered by the liability for property damage. Damage to vehicles or other property caused by an accident in which you were at fault is one example.
Rental unit owners can help you protect yourself from any liability as a landlord. Liability claims can include:
- Someone trips over a crack on the sidewalk and sues you for damages
- You could be held responsible if your tenant’s dog bites someone.
You’re also covered if you are sued for:
- Slander: an injurious spoken statement
- Libel: a written statement that is harmful
- False arrests, detentions, or imprisonment
- Malicious prosecution
- Shock/mental anguish
What is excluded from an umbrella policy?
The umbrella policy provides broad coverage. Unlike some insurance policies that only cover specific incidents, umbrella policies cover all incidents. No insurance policy can cover everything. Your umbrella policy may not cover certain things.
- Damage to your property. It’s important to remember that this is a liability insurance policy and will only cover damage caused by you. You should have enough insurance for your home and possessions.
- Intentional damage caused by you or any member of your household covered under the policy. If you pushed a party guest down a flight of stairs on purpose, umbrella insurance would not cover the cost of the lawsuit (nor would homeowner’s).
- Liability in the course of business or professional activity. Business Liability Insurance will cover you for these events.
- You agreed to accept liability under a signed contract.
- Liability arising from war or armed conflict. You’ll have a hard time finding insurance that will cover war-related damages; the financial losses are simply too high for insurers to cover.
Where can I buy umbrella insurance?
It is likely that you can purchase it through the same company who covers your auto and home. It may be possible to purchase it through a different company. Request quotes to compare the best options.
The bottom line
A personal liability lawsuit can result in a large financial judgment for even the most careful and well-intentioned person. Although you may feel that you are unlikely to be in this position, it is wise to protect yourself from a financial loss that could be devastating. You can do this with umbrella insurance.
