Umbrella Insurance

What Is Umbrella Insurance?

Protecting your family and assets is a top priority, which is why people have insurance. Personal umbrella insurance is a type of insurance designed to add extra liability coverage over and above another insurance policy, such as auto or homeowners insurance.

WHAT DOES A PERSONAL UMBRELLA INSURANCE POLICY COVER?

A personal umbrella policy, sometimes referred to as umbrella insurance, is meant to help protect you from large and potentially devastating liability claims or judgments. Personal umbrella coverage comes into play when your underlying liability limits (such as from a homeowners or auto insurance policy) have been reached.

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What Is Typically Covered by an Umbrella Insurance Policy? What Is Typically Not Covered by an Umbrella Insurance Policy?
Bodily injury Personal belongings
Personal injury Business losses
Property damage Intentional or criminal acts or omissions
Landlord liability Written or oral contracts

Personal Umbrella Insurance Policy in Action

Here’s an example of how a personal umbrella policy works: If you’re at fault in a car accident that injures another driver, your regular auto insurance may cover the other driver up to the limit you selected, say $250,000. But, what happens if that limit is not enough to cover the other driver’s resulting medical bills? If the other driver’s injuries are severe, you may be legally responsible for damages beyond the $250,000 your car insurance policy covers. And, if he sues you, your personal assets could be at stake.

Imagine if that injured driver were a surgeon or another highly paid professional. What if the accident you caused resulted in an injury that kept him from doing his job for six months? Suddenly, he’s suing you for $1 million to cover the six months he’s away from work. Your auto policy’s liability coverage may pay for up to $250,000, but where would you come up with the remaining $750,000? A personal umbrella policy can help cover the additional costs when your standard insurance policy isn’t enough.

An umbrella policy could provide the additional coverage you need so that you don’t get stuck trying to pay the remaining balance yourself. This extra policy could help protect your bank account, home and other personal property. In most cases, personal umbrella policies are available in million-dollar increments, from $1 million to $5 million. While an umbrella policy is not required, it may offer increased protection in the unfortunate event of an accident.

Is Umbrella Insurance The Same As Excess Liability Insurance?

Umbrella insurance is sometimes referred to as excess liability protection, but these are actually two different types of insurance. Not all insurers offer excess liability coverage. These policies only provide coverage for the same risks as your underlying policy and comes with the same exclusions. For example, if you have excess liability coverage on your homeowners insurance policy, you’ll likely have additional protection if you are found responsible for a visitor’s injuries at your home. However, you probably would not have coverage for a libel or slander settlement, because defamation is not a risk covered by standard homeowners liability insurance. Meanwhile, a personal umbrella policy typically provides greater liability coverage for situations covered by your underlying policy, as well as protection for other risks. For example, umbrella insurance can help pay for a libel or slander judgment against you, while a standard homeowners liability coverage, even if you have excess liability coverage, probably will not. A local agent can answer questions about personal umbrella policies so you can decide whether having additional liability coverage makes sense for you.

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