Umbrella insurance, also known as excess liability insurance, is a type of personal liability insurance designed to protect people who own significant assets from an excess liability event. Below is more information about how umbrella policies work, who they’re intended for, and what they do and do not cover.
How An Umbrella Policy Works
Umbrella insurance provides additional liability coverage beyond the limits on your homeowners, automobile and other insurance policies (such as boat insurance). For instance, a full-coverage automobile policy typically provides $300,000 in bodily injury coverage per accident. A few hundred thousand dollars in coverage will likely be inadequate in the event of a devastating accident, however, which could potentially result in millions of dollars of liability to cover an injured party’s lifelong care, lost wages, and pain and suffering.
Typically, umbrella insurance policies have limits of $1 million or higher. So, if you have a $300,000 limit on your vehicle policy and are found liable for $800,000, the umbrella policy should cover the $500,000 difference.
What Other Events Does an Umbrella Policy Cover?
Most payouts for umbrella policies stem from automobile accidents, but injuries that occur on the policyholder’s property – such as from slip-and-falls, swimming pool accidents, or dog bites – can also result in high-liability events. Umbrella insurance covers the policyholder and eligible family members living in the household from a variety of liability events, including some that are not covered by their homeowners or vehicle insurance policies. For instance, if a policyholder is sued for slander or libel, or if his teenage son causes an accident with a rental car while on vacation, the umbrella policy may provide coverage. For events in which homeowners or vehicle insurance does not apply, a deductible will have to be satisfied before the umbrella coverage kicks in.
Who Should Get Umbrella Insurance?
Anyone with a total asset value that exceeds the limits on their homeowners or automobile insurance policies could potentially derive some benefit from umbrella insurance. But the fact is that some people are at greater risk of being sued than others. For instance, celebrities and other high-profile people may be more likely to attract lawsuits, since people assume they have a lot of money. Landlords as well as people with an inexperienced driver in their household are at increased liability risk and should also consider purchasing an umbrella policy. This insurance product may also be appropriate for people who engage in activities such as skiing, hunting or snowmobiling, activities that could injure others, or for those who own items such as a dog, pool, gun or trampoline that could cause injury. People who regularly post reviews of products and businesses may be at increased risk of a libel lawsuit.
How Much Do Umbrella Policies Cost?
Compared to other types of insurance, umbrella insurance is relatively inexpensive, costing about $150 to $300 per year for the first $1 million in coverage, according to the Insurance Information Institute.
What Events Are Not Covered?
Umbrella insurance generally does not include coverage for business or professional activities, damage to personal property, intentional acts, or contractual liability. Check the individual policy for specific exclusions.
If your insurance company has denied or is disputing your umbrella insurance claim, do not hesitate to call us for assistance. We have the experience, expertise and tenacity to make sure insurance companies keep the promises they made to policyholders like you.
If you have any questions concerning a bad faith case, or any other questions about insurance coverage, please contact us.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack