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Key takeaways:
- A personal umbrella insurance policy provides additional liability protection over and above that already provided by your auto, homeowners, and other insurance.
- An umbrella policy does not replace your other insurance coverage but goes ‘over the top’ to add an extra level of protection.
- Umbrella insurance is relatively inexpensive, particularly considering the peace of mind that it provides.
Accidents happen. If you already have auto and homeowners insurance, you might think you’re covered. But what happens if you’re found to be ‘at fault’ for causing injury to someone, and the judgment against you is larger than the liability limits of your existing insurance policy?
Damages awarded can add up to millions of dollars. If your insurance doesn’t cover it all, you will be held responsible for payment of the remaining judgment. The courts could garnish your wages, limiting your future income, or force you to sell your assets.
A personal umbrella policy provides additional liability protection over and above that already provided by your auto, homeowners, and other insurance policies. Like an actual umbrella, this policy sits above your other insurance and protects you when existing policies have met their limit.
How an umbrella insurance policy works
An umbrella policy provides liability coverage, protecting you from bodily injury and property damage liability as well as personal liability claims for actions you could be sued over. The coverage takes over when your other insurance policies reach their coverage limit, increasing your liability coverage by $1 million or more.
For example, if someone falls at your house and is seriously injured, you might be held responsible. Your homeowners liability coverage will provide protection, but only up to a certain limit. An umbrella policy would provide additional liability coverage above the amount provided by your homeowners insurance.
What an umbrella insurance policy covers
Here are a few examples of what an umbrella policy could cover:
- Legal fees: if someone sues you, your umbrella coverage can be used to help pay your legal defense expenses
- Damage done by a party guest: if an intoxicated person leaves your home after a party and causes an accident, you could be indirectly held liable for the damages
- Dog bites: if your dog bites another person or pet, you could be held responsible for the medical or vet expenses
- Volunteer liability: if you volunteer or serve on the board of a charitable organization and they are sued, you could be held responsible as a party to the lawsuit
- Rental liability: you could be held liable for accidents which occur when you’ve rented a recreational item, such as a jet ski or a scooter
Who needs umbrella insurance coverage?
Do any of these apply to you?
- Have pets, especially dogs
- Have teenage drivers or drive a carpool
- Have a swimming pool, a tree house, a boat dock, or a trampoline
- Possess multiple properties, or operate any as a rental
- Have savings you want to protect
- Own or operate recreational vehicles such as ATVs
- Hire people who work on your property, such as housecleaners or landscapers
- Have other things that put you at risk of being sued
Get the right umbrella insurance policy for you
Your cost and recommended level of umbrella coverage will depend on several factors, including the number of people in your household, your properties and their uses, the number and types of vehicles you own and operate, and more.
There are two types of insurance policies that can provide additional coverage–an umbrella policy and excess liability coverage. It’s important to understand the difference. Excess liability policies only provide additional coverage and higher liability limits for policies you already have in place. An umbrella policy is not tied to an existing policy; it can provide higher liability limits and broader coverage for something that your existing policy might not cover.
Which is right for you? A good insurance broker will help you decide. Many people are surprised to learn how inexpensive umbrella insurance is—generally costing just a few hundred dollars a year—so don’t wait.
