A serious accident or lawsuit can exceed the liability limits of a homeowners or auto insurance policy. Personal umbrella insurance provides an additional layer of liability protection that can help safeguard your savings, income, home, and other assets. Below are answers to common questions about personal umbrella insurance.
What is personal umbrella insurance?
Personal umbrella insurance provides additional liability coverage above the limits of certain underlying policies, such as homeowners, renters, auto, boat, or landlord insurance.
If a covered liability claim exceeds the limit of an underlying policy, the umbrella policy may pay the remaining covered amount up to its own limit.
How does an umbrella policy work?
Suppose you cause an auto accident and are legally responsible for $800,000 in injuries and damages. If your auto liability policy covers $300,000, a personal umbrella policy could potentially cover the remaining $500,000, subject to its terms and limits.
Without umbrella insurance, you could be personally responsible for damages that exceed your auto policy’s limit.
What does personal umbrella insurance cover?
Depending on the policy, umbrella insurance may provide additional protection for claims involving:
Coverage varies by insurance company and policy.
Who should consider personal umbrella insurance?
Umbrella insurance can benefit many individuals and families, not only wealthy households. You should consider it if you:
Anyone can be sued after a serious accident, even when current assets are limited.
How much umbrella insurance do I need?
The appropriate limit depends on your assets, income, lifestyle, and potential liability exposures. Personal umbrella policies commonly begin at $1 million, with higher limits available.
When selecting a limit, consider your:
An insurance agent can help evaluate the amount of protection appropriate for your situation.
Does umbrella insurance cover my home and belongings?
Personal umbrella insurance provides liability protection. It does not normally pay to repair your home, replace your belongings, or cover damage to your vehicle.
Property damage to your own home or belongings must be covered by the appropriate homeowners, renters, auto, or other property insurance.
Does umbrella insurance cover family members?
A personal umbrella policy may cover the named insured, spouse, and certain household members. The definition of an insured person varies by policy.
Household members and drivers should be accurately listed on the underlying policies. Discuss adult children, students living away from home, and relatives living in the household with your insurance agent.
Does umbrella insurance cover rental properties?
A personal umbrella policy may provide excess liability coverage for eligible rental properties. However, every property must be disclosed and may need to be listed on the policy.
The rental property must also carry its own landlord liability insurance with limits that meet the umbrella insurer’s requirements.
Does umbrella insurance cover a home-based business?
Personal umbrella insurance generally excludes or restricts liability arising from a business or professional activity. A separate general liability, professional liability, or commercial umbrella policy may be needed.
Home-based business owners should not assume that homeowners or personal umbrella insurance will cover business-related claims.
What is not covered by a personal umbrella policy?
Common exclusions may include:
The exact exclusions depend on the policy.
What are underlying insurance requirements?
Insurance companies normally require minimum liability limits on the auto, home, boat, and other policies beneath the umbrella.
For example, you may need to increase your auto or homeowners liability limits before an umbrella policy can be issued. If you fail to maintain the required limits, you could be responsible for the coverage gap.
Does umbrella insurance cover legal defense costs?
A personal umbrella policy may help pay attorney fees and other defense expenses for a covered liability claim. How those expenses affect the policy limit depends on the contract.
Legal defense can be costly even when a lawsuit is unsuccessful, making this an important part of the coverage.
How much does personal umbrella insurance cost?
The cost depends on the coverage limit, number of homes and vehicles, household drivers, rental properties, boats, recreational vehicles, and other exposures.
Umbrella insurance is often relatively affordable compared with the amount of additional liability protection it provides.
Add Another Layer of Protection
Your homeowners and auto insurance provide important liability coverage, but their limits may not be enough after a serious accident.
Contact us today for a personal liability insurance review.
Coverage descriptions are general. Actual coverage is determined by the policy’s terms, conditions, limits, endorsements, and exclusions.
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