Look at umbrella insurance as a secondary coverage that protects your assets with an extra layer of liability protection. It kicks in when your underlying (or primary) policy doesn't provide sufficient liability protection. For example, if the liability limits are exhausted on your auto insurance, your umbrella insurance would take over and provide you with additional protection of at least $1 million or up to the level of coverage you purchased. If you have $500,000 liability coverage on your auto policy and $1 million umbrella coverage, your total auto liability coverage is increased to $1.5 million.
When would I need umbrella insurance?
In today's litigious society, you need to consider the potential financial ramifications if something happens. Imagine if your dog were to bite a neighbor's child. Or if there's an accident on your rental property. Or a fire in your condo spreads to other units. What would happen if you or a family member missed a stop sign and struck and killed a pedestrian? If any of these things happened to you, there's a good chance your current liability limits wouldn't be adequate to protect your assets or your future earnings.
The benefits of having this extra layer of protection are great. Consider that your umbrella provides additional liability coverage above the limits of your homeowners, auto and boat insurance policies. This protection is designed to kick in when the liability on these other policies has been exhausted. It also provides coverage for claims that may be excluded by other liability policies including: false arrest, libel, slander, and liability coverage on rental units you own.
Breaking down what an umbrella actually covers.
Umbrella insurance provides coverage for:
Damage to property
Personal liability situations listed below.
You are probably thinking, "I have auto and homeowners insurance that covers some of these situations." True! But, umbrella insurance insures you above and beyond the limits of those policies and covers some situations that aren't covered by the other types of policies.
Here are some examples of how your umbrella can cover you:
Bodily Injury Liability - covers the cost of damages to another person's body. Examples include the cost of medical bills and/or liability claims as a result of:
- Injuries to other parties due to a serious auto accident where you are at fault
- Harm caused to others as a result of your dog
- Injuries sustained by a guest in your home due to a fall
- Injuries sustained by a neighbor's child who falls while playing in your yard
- Damage to vehicles and other property as a result of an auto accident where you are at fault
- Damage claims incurred when your pet rips a friend's priceless oriental rug to shreds
- Accidental damage to school property caused by your child (hey, you can't disown them)
- Someone tripping over a crack in the sidewalk of your rental property and suing you for damages
- Your tenant's dog biting someone and you being held responsible for the injuries
- Slander - injurious spoken statement
- Libel - injurious written statement
- False arrest, detention, or imprisonment
- Malicious prosecution
- Shock/mental anguish
- Other personal liability situations
Can I get just an umbrella policy?
To qualify for most umbrella insurance coverages, you must carry auto insurance with specific amounts of liability coverage. Other policies you have must meet certain minimum liability coverage levels and other conditions may also apply.