It is often surprising, as an insurance agent, to find out that many people have never heard of umbrella insurance before. So if you are just doing research for the first time on whether umbrella insurance is the right coverage for you, then you have come to the right place as this blog will attempt to inform you on what it is.
The most basic way to describe it is as “excess coverage over an underlying policy, when that underlying policy has been exhausted or reached its limits”. For some umbrella policies that can also be excess insurance for coverages not covered under a primary policy (ex, home and auto) and be said to “drop down” to cover things not listed in the primary policies (ex. false arrest, libel, slander, invasion of privacy).
Umbrella insurance can be particularly important if you have a lot of assets to protect, as it would help to protect from losing those assets if you are liable for a loss and had to sell something to cover that loss. For the average U.S. citizen policies between $1-3 million are the norm for umbrella coverage and they come fairly inexpensive for such a broad coverage. For example if you get into a car accident and caused enough damage or injury that exceeded your $500,000 limit, the umbrella would kick in to cover any excess losses that occur from that car accident.
The above is meant as general information and as general policy descriptions to help you understand the different types of coverages. These descriptions do not refer to any specific contract of insurance and they do not modify any definitions expressly stated in any contracts of insurance. We encourage you to speak to your insurance representative and to read your policy contract to fully understand your coverages.