An extra layer of protection for the unexpected.
An Umbrella or Excess Liability policy (and there is a difference) will provide additional coverage in increments of $1 million over the liability policies you have purchased to protect your personal assets i.e. Home, Auto, Boat, RV, ATV, Snowmobiles, Jet Ski, Motorcycle, etc. Please note that the umbrella policies have a minimum required limit before they will activate and provide coverage. Be sure to maintain the minimum requirement or there will be a gap in the coverage, which puts you at risk for out of pocket exposure.
Why buy an umbrella policy?
In our extremely litigious society, there’s a number of reasons why almost (if not) everyone should have additional liability coverage.
If you look at it from a risk standpoint – does your lifestyle or home include inherent risks? i.e. swimming pools with or without diving boards, trampolines, watercrafts, atv’s, teen drivers, etc. Additionally, if you hold a high profile position or have a higher than average net worth, you should definitely consider adding an umbrella policy to your insurance portfolio.
When it comes down to it, it’s never a bad idea to increase your level of liability insurance and protect the assets you’ve spent your entire life building.
What protection does an umbrella policy provide?
Increased dollar limit of liability over primary policies
Example: Imagine you have $500,000 of liability coverage on your auto insurance policy, and purchase a $1 million umbrella policy. If you were to cause an accident that exceeds that $500,000 limit, say $750,000 – once your auto policy limit pays out $500,000, your umbrella insurance policy will pay out the additional $250,000 to settle the claim.
In this same scenario, if you chose to forego the umbrella policy, you would be personally responsible to write a check for that $250,000.
Adds certain coverage for claims excluded by primary policies
With any insurance policy, there’s an entire section dedicated to exclusions. An umbrella insurance policy will add additional protection to cover certain gaps in those policies.
A typical liability insurance policy may not cover damage claims from a number of personal injury acts such as false arrest, libel, slander or defamation of character. Should you find yourself liable for a claim resulting from these actions, and umbrella policy may help cover associated costs.
Real world examples
It doesn’t take a lot to exhaust the underlying liability limits on your auto, home, or other insurance policies. Here are a few basic examples where an umbrella policy will stand between you and financial destruction.
Your child has friends over and they’re having a blast in your beautiful pool. One of the kids slips on an overzealous diving board attempt and is seriously injured requiring a hospital stay. The medical and rehabilitation costs stack up, and once your homeowners insurance liability limits are exhausted, your umbrella policy will cover any costs above that limit.
As careful of a driver as you are, you took your eyes off the road for just a second and before you knew it- you were in a collision with a family on a road trip. The family of 6 required medical attention, quickly exhausting the liability limits on your auto insurance policy. Rather than having to come out of pocket for the additional costs, your umbrella policy pays the additional costs above your auto limits.
Your dog escapes your yard and bites a neighbor causing a severe injury. Again, once your homeowners insurance liability limits are exhausted, your umbrella policy will cover additional costs over your homeowners limit of liability.