Umbrella insurance, or what is more commonly referred to as excess liability insurance, extends your liability coverage limits, offering you an extra layer of protection. It can be added to your regular auto, homeowners, or boat insurance policy.
While anyone can benefit from this type of coverage, it’s especially useful if you’re regularly involved in high-risk situations. For example, if you’re at risk for being sued, you have high-value assets, or you own a small business, you may want to add an umbrella insurance policy.
How does umbrella insurance work?
Let’s say someone sues you and wins a $600,000 settlement. If your personal liability on your homeowners or renters insurance policy only provides $300,000 in coverage, you may be personally responsible for the remaining $300,000 in liability. If you have an umbrella policy, the additional $300,000 may be covered by the umbrella or excess liability policy.
Who should consider an umbrella insurance policy?
Anyone can potentially benefit from umbrella insurance (because no one knows what kind of accident they may get into). But certain people are at higher risk for more costly damages. If you fall into any of the following categories, you should strongly consider adding an umbrella insurance policy.
- Are a high-value property owner
- Are a landlord
- Engage in high-risk sporting activities
- Have a recreational vehicle (ATV, jet ski, boat)
- Own potentially dangerous items (trampoline, swimming pool)
- Volunteer regularly
- Own vacant land
- Have a large amount of savings in the bank
- Drive a luxury vehicle
This insurance also extends to family members in your household who don’t have their own policies. So if your teenager lashes out at someone online, for example, you’ll be covered.
What is the cost of umbrella insurance?
As always, the cost of your insurance policy will depend on your circumstances and the amount of coverage you choose. Minimum umbrella insurance coverage starts at $1 million. According to the Insurance Information Institute, you can buy a $1 million personal umbrella liability policy for only $150–$300 a year. Before adding umbrella insurance for you, insurers will typically ask that you have around $250,000 of liability insurance on your personal auto policy or $300,000 on your homeowners policy.
What does it cover?
Umbrella insurance provides extra liability coverage that extends beyond your regular liability coverage. This will protect you if you’re involved in expensive claims or lawsuits. It can also help cover claims that may not be covered by a regular insurance policy.
You can add umbrella insurance to the following types of coverage:
- Bodily injury liability
- Property damage liability
- For legal fees if you’re sued for slander, libel, defamation, or false arrest
- Landlord liability
Let’s say you’re a landlord who personally owns a property and one of your tenant’s dogs bites another tenant. If this occurs on your property, you could be held responsible for the medical bills and any court fees. Or, imagine you write a review that doesn’t sit well with the owner of the restaurant, and he sues you for defamation. Umbrella insurance will cover you up to the limits of your policy. These are both examples of how an umbrella policy may cover you when your underlying coverages are not sufficient.
What is not covered?
Typically, your umbrella policy won’t cover damage to your personal property/belongings, personal injuries, an intentional or criminal act that causes damage, business losses, flood damage, or written/oral contracts.
People often misunderstand what an umbrella policy will cover. In most cases, an umbrella policy truly represents excess liability, which is contingent upon underlying coverages being in place and reacting before the umbrella policy will react. In other words, if there isn’t coverage on the underlying policy, the umbrella will not provide coverage.
Need an umbrella insurance quote?
Do you fall into any of the above “high-risk” situations? Or would you like to ensure that your insurance covers you in a worst-case scenario? Simply let your insurance agent know you’d like to add umbrella insurance to your existing policy.
We’d be happy to get you a quote and make sure you’re taking advantage of all available discounts. Let us know if you’d like us to shop around to find you some better options for your budget and lifestyle. You can reach out any time!