Personal Umbrella Insurance: What It Is and Why You May Need It
Jaime Chaifetz August 21, 2018
Regardless of your age or station in life, you can be at risk for lawsuits because we live in an exceptionally litigious culture. When this occurs, you can lose just about everything, including your hard-earned investments and savings.
When you have an umbrella insurance policy, however, you don’t have to worry since this type of policy provides the extra coverage you need.
Here’s what you need to know about personal umbrella insurance and why you may need it.
What Is a Personal Umbrella Insurance Policy?
Simply put, umbrella insurance, also known as excess liability insurance, is additional liability insurance coverage. The purpose of this type of policy is to give you extra insurance protection from lawsuits and major claims so that your assets are protected.
In other words, it gives you liability coverage that goes beyond the limits of your auto, homeowner’s, or boat insurance policy.
What a Personal Umbrella Insurance Policy Covers
In addition to providing additional liability protection, this type of insurance policy also protects clients in situations that aren’t typically covered by a home insurance policy. These include things such as a wrongful eviction, slander, libel, invasion of privacy, and others. It also offers protection from litigation that arises from bodily and personal injuries, property damage, and legal defense expenses because of lawsuits.
Common Examples of Assets Protection from Umbrella Insurance
Assets protection is the main benefit of having a personal umbrella insurance policy. Here are some examples.
- Imagine you’re responsible for an auto accident and are required to pay $400,000 for damages, but you only have $300,000 coverage in your insurance policy. When you have umbrella insurance, your policy picks up the additional $100,000. That’s why an umbrella insurance policy is also called excess liability insurance.
- Here’s another scenario. Suppose you’re sued for $500,000, but your home insurance policy only covers you for $250,000. If you have an umbrella insurance policy, you don’t have to pay the extra $250,000 that you owe because your policy picks up the tab.
- Still another example is your dog biting someone, such as your child’s friend, and you don’t have enough homeowner’s insurance to cover the expenses from the injury. In this situation, your umbrella insurance policy will cover the medical bills.
- As a final example, pretend a neighbor slips on olive oil on your kitchen floor and injures their back, which requires surgery and a hospital stay costing $150,000. However, your homeowner’s policy only covers $100,000. Even worse, you get sued for $500,000, which includes costs for pain and suffering, and you lose your case. This is not a problem if you carry umbrella insurance as the extra coverage makes up the difference.
Besides assets protection, there are other benefits to having a personal umbrella insurance policy.
- Affordability is a huge perk as this insurance policy doesn’t cost much. Consider that you can buy a $1 million policy for about $150 to $300 annually. As this insurance policy is exceptionally low in cost, it pays to have the additional protection when you have a lot of assets that could be lost or when you face risks.
- Your family, as well as your pets, are covered for damage claims. Let’s face it: You can’t always control family members and animals.
- It gives you a secure retirement nest egg. When you’re faced with a lawsuit that’s unexpected, your retirement fund can easily evaporate which can delay your retirement.
- Finally, a personal umbrella insurance policy gives you peace of mind.
What Umbrella Insurance Does Not Cover
On the other hand, umbrella insurance doesn’t cover everything, such as:
- Oral or written contracts are not covered in a personal umbrella insurance policy.
- Illegal or criminal acts aren’t covered. For example, it doesn’t cover you in illegal actions, such as those involving drag racing.
- Personal belongings are also not covered.
People Who Need This Type of Insurance
Although umbrella insurance isn’t required, it’s usually purchased by people who need it more than others, such as those who are more at risk for lawsuits, including:
- Homeowners and especially those with a significant amount of assets
- People with swimming pools
- Coaches of children’s sports, such as soccer and T-ball
- Hunters and others with hobbies that could injure people
- Dog owners of large, aggressive breeds
- Individuals serving on nonprofit boards
It’s important to determine if you need this type of insurance coverage. Please contact us and let one of our experienced and highly trained insurance agents help you make this decision.