Most people are familiar with common insurance policies like homeowners, auto and motorcycle insurance, but often missed is a Personal Umbrella policy. Generally speaking, an insurance policy has limits on how much money the insurance company will pay (minus your deductibles) in any valid claim. In some cases, the total damages you owe can be much higher than the amount an insurance company will pay for a claim. This means that you are bound to pay, out-of-pocket, for the difference. In this situation, umbrella insurance comes in to cover the difference once your primary insurance policy is maxed out.
What Does Umbrella Insurance Cover?
A personal umbrella insurance policy covers you beyond the limits of your insurance policy or, in some cases, even claims that are not covered by your liability policy. Most frequently, an umbrella policy provides coverage for the following:
- Bodily Injury
- Particular lawsuits
- Property damage
- Personal injury
- Landlord liability
- Legal costs and other claims such as defamation
What a Personal Umbrella Insurance Does Not Cover
- Umbrella insurance covers you for third party liability. It does not cover any of your costs – for example, injuries or damages to you or your own assets. For example, you left the tap open and your bathtub overflowed and destroys a part of your house. This is not covered by umbrella insurance. However, if you flooded your own home and it subsequently damaged a neighbor’s house, the third party damage to your neighbor’s property would qualify for coverage under an umbrella.
- Losses related to your business operations or damages to your business property are also generally not covered by your umbrella policy. This exclusion is applicable even if the business operates at your own home. Business liability/damages would need to be addressed with a Commercial Umbrella.
- Umbrella insurance does not cover illegal or criminal activities. It will not cover you from the repercussions of your own illegal or intentionally harmful behavior.
- Contractual liability is another case that umbrella insurance does not cover. It will not protect you from liabilities arising from written or oral contract that you have entered to.
Is Umbrella Insurance the Same as Excess Liability Insurance?
Umbrella Insurance is sometimes referred to as excess liability protection, but they are actually two different types of insurance.
An excess liability policy provides additional coverage after an underlying insurance policy has reached its limit. It covers claims that could have been covered in the underlying policy but excludes claims the underlying policy does not cover. For example, if an injury happens in your home and you are found responsible for it, you will have coverage in this claim. However, in the case that you would be sued for slander or libel coming out of this injury, you will not be covered with excess liability insurance since these claims are not covered by your underlying homeowner’s liability policy.
On the other hand, an umbrella policy will give greater liability coverage for which is covered by your existing policy as well as other potential risks. It covers additional liability that exceeds your underlying policy’s coverage. For example, an umbrella insurance can help pay for a slander or libel lawsuit against you, even if your excess liability policy will not.
Do You Need an Umbrella Insurance Coverage?
Indeed, an umbrella insurance is not required by law. Often, it is availed by people who have assets to protect or have a higher chance of getting sued. This insurance policy can help in preventing paying out of pocket for another person’s legal or medical bills should you be found accountable for damages or injury.
It also extends to the other members of your family – your spouse, children and other relatives who do not have automotive or property insurance that named after them.
How Much Does an Umbrella Insurance Cost?
Comparing to the high cost of lawsuits, premiums for umbrella insurance are insignificant, considering how much the policy can cover. The cost of an umbrella insurance policy will depend on how the limits you purchase.
It is good to note that it pays to get the entire package. Some insurance companies can or may give you a better deal on liability policies if an umbrella insurance is added.
Understanding specific insurance policies can be a challenge on its own. We, at Inszone Insurance, have the knowledge and expertise to make sure that you have adequate coverage at the appropriate price. Feel free to reach out to us, we’ll be more than happy to find the right insurance policy for you.