Protecting your family and your assets is a priority. That’s why people have insurance. That’s why people ask what an umbrella insurance policy that covers you is?
Many people’s umbrella insurance is a type of insurance designed to add additional or sideline liability coverage on top of another insurance policy, such as auto or home insurance.
What Does a Personal Umbrella Insurance Policy Cover?
A personal umbrella policy, sometimes called umbrella insurance, is intended to help protect you from large and potentially devastating liability claims or lawsuits.
Personal umbrella coverage comes into play when underlying liability limits on a home or auto insurance policy have been reached.
What does an umbrella insurance policy typically cover?
- bodily injury
- personal injury
- property damage
- Owner’s Responsibility
What is typically not covered by an umbrella insurance policy?
- personal belongings
- business losses
- Intentional or criminal acts or omissions
- Written or oral contracts
Who needs umbrella insurance?
Umbrella insurance can benefit almost everyone. That’s because accidents that result in high costs can happen to anyone.
An umbrella insurance policy can help prevent you from paying someone else’s medical or legal bills out of pocket if you are found liable.
For example, let’s say you are found liable after a guest is injured while swimming in your pool or playing in your yard.
Or, let’s say you are found at fault in a car accident that injures another person.
An umbrella insurance policy can help cover the resulting expenses in situations like this up to your policy limit.
Umbrella insurance is also often extended to other members of your household, such as your spouse, children, and other relatives living in your home who do not have auto or property insurance in their name.
So if your spouse causes a car accident or your teen is issued for posting a defamatory comment online, your umbrella insurance policy can help protect them too.
Your agent can answer questions about who your policy may or may not cover.
Personal umbrella insurance policy in action
Here is an example of how a personal umbrella policy works:
If you’re at fault in a car accident that injures another driver, your regular car insurance may cover the other driver up to the limit you’ve selected, say $250,000.
But what if that limit isn’t enough to cover the other driver’s resulting medical bills?
If the other driver’s injuries are severe, you may be legally liable for damages over the $250,000 covered by your auto insurance policy.
If you sue, your personal property could be at stake. Imagine if that injured driver were a surgeon or other highly paid professional.
What if the accident you caused resulted in an injury that prevented you from doing your job for six months?
Suddenly, he demands a million dollars to cover the six months out of work.
Your auto policy’s liability coverage can pay up to $250,000, but where would you get the remaining $750,000?
A personal umbrella policy can help cover additional costs when your standard insurance policy isn’t enough.
An umbrella policy could provide you with the additional coverage you need, so you don’t get stuck trying to pay off the remaining balance yourself.
This additional policy could help protect your bank account, home, and other personal assets.
In most cases, personal protection policies are available in $1 million increments, from $1 million to $5 million.
Although an umbrella policy is not required, it can offer increased protection in the unfortunate event of an accident.
What is generally not covered by an umbrella policy?
Let’s see what this type of policy does and does not cover.
Your personal property
While personal umbrella insurance is designed to help cover expenses if you’re held responsible for damage to someone else’s property, that coverage typically won’t apply if you cause damage to your property.
Suppose your bathtub overflows, destroying the plaster walls of your house. Your damages would be excluded from coverage.
But if the overflow destroys your downstairs neighbor’s property, your umbrella insurance may cover the damage caused by your negligence, preventing you from paying out of pocket for the loss.
However, it is essential to note that any umbrella insurance benefits would only kick in after exhausting the underlying policy limits.
Losses related to the operation of your business or damage to your business property would generally not be covered by a personal umbrella policy.
The exclusion applies even if the business is home-based.
For example, if you earn money providing child care in your home, any liability resulting from that arrangement would probably not be covered.
Personal umbrella insurance typically does not cover other business-related liabilities, such as a negligence claim or losses related to your paid position as an officer or member of the board of directors of a for-profit organization.
Criminal or intentional actions
A personal protection policy does not usually protect you from the consequences of your own intentionally harmful or illegal behavior.
For example, the restitution you owe if you are convicted of a crime or the harm you intended to cause by your actions.
Personal umbrella insurance will not protect you from any liability arising from an oral or written contract you have signed.
So if you’re facing a lawsuit from someone you’ve hired to work on your home, for example, your umbrella insurance is unlikely to provide protection.
Is umbrella insurance the same as excess liability insurance?
Umbrella insurance is sometimes known as excess liability protection, but they are two different types of insurance.
Not all insurers offer excess liability coverage. These policies only provide a range for the same risks as your underlying policy and come with the same exclusions.
For example, suppose you have excess liability coverage on your homeowner’s insurance policy. In that case, you may have additional protection if you are found liable for a visitor’s injuries to your home.
However, you may not be covered for a libel or slander settlement because libel is not a covered risk under standard homeowners liability insurance.
Meanwhile, a personal protection policy typically offers increased liability coverage for situations covered by your underlying policy, as well as protection for other risks.
For example, umbrella insurance can help pay a libel or slander judgment against you.
Whereas standard homeowners liability coverage, you probably won’t, even if you have excess liability coverage.