What is Umbrella Insurance?
Umbrella Insurance
Most states require some type of liability insurance, and many people have liability insurance for cars, homes, and even boats. But what happens after an accident when the liability coverage isn’t enough for all the costs? This situation can happen to people, usually those who own property and have a large amount of assets, and it’s important to be prepared. The best way to prepare for excess liability costs is with an umbrella insurance policy. Read on to learn more about what umbrella insurance is for, what it covers, and who it’s for.
What is Umbrella Insurance?
Umbrella insurance is often called excess liability insurance, and it covers damages that exceed the limits of a liability policy. It’s a way to protect your savings and assets from excessive liability costs and lawsuits. This extra layer of personal liability insurance covers all the other policies you might have such as home, auto, boat, and motorcycle. The minimum amount of coverage is $1 million, with each policy typically increasing by a million more in coverage. The premiums for umbrella insurance are most often extremely affordable for the amount of coverage provided. At Cheap Car Insurance, we get you free quotes—including umbrella insurance quotes—to find the cheapest insurance, including the cheapest umbrella insurance policies.
What is Covered by Umbrella Insurance?
While umbrella insurance covers most things outside the limits of a liability policy, there are some specific things it covers.
- Others’ injuries, funeral costs, and property damage in an accident. Most liability policies will cover this, but umbrella insurance will cover costs that exceed your limits. This is extremely beneficial in large or serious accidents. This type of coverage includes injuries in a car accident where you are at fault, injuries caused by your dog, a guest falling in your home, a neighbor getting injured on your trampoline, and other similar damages.
- Injury or damage on your property. This is one of the benefits only provided by umbrella insurance, and it covers the costs of injuries and potential lawsuits. This is particularly relevant to landlords who need insurance to cover injuries to tenants on their property.
- Legal defense costs. Most liability policies won’t cover the costs of lawsuits that can often ensue after any type of accident, but umbrella insurance will cover you. Umbrella insurance can even cover false arrest, detention, and imprisonment; malicious prosecution; and shock or mental anguish.
- Lawsuits for libel and slander or other personal attacks. Libel is written defamation, and slander is spoken defamation, and umbrella insurance can cover the lawsuits for both. These types of lawsuits aren’t normally covered by liability insurance but is a benefit of umbrella insurance.
It’s important to remember that umbrella insurance only needs to cover anything if a liability policy has been exhausted.
What is Not Covered by Umbrella Insurance?
Personal umbrella policy insurance covers many situations, but there are some things that the policy specifically won’t cover and an insurer won’t accept, in most situations.
- Your own injuries. Some policies can cover this, but the majority of umbrella coverage options don’t include any injuries you or your passengers sustain.
- Damage to personal belongings or property. Umbrella insurance won’t cover any damage somebody inflicts on their own property. Any damage to your own car or belongings on your property aren’t covered by your policy, only the damages others sustain from these. Other types of insurance will cover damages to things such as your car, boat, or property.
- Intentional or criminal acts. If somebody causes damages or injury intentionally or in a way that violates the law, umbrella insurance won’t cover the costs of damage. Umbrella insurance also won’t cover criminal acts on your property.
- Business losses. Personal umbrella insurance only covers those under the policy and not any damage to business property or assets. The policy also won’t cover the lawsuits for a business such as malpractice.
- Contract obligation liabilities. Some insurers will include this, but most won’t cover the liability costs from any written or oral contracts you’ve entered into. So if you had a contract for someone to work on your home and there was an accident, most umbrella policies won’t cover it.
The Benefits of Umbrella Insurance
Umbrella insurance provides unique and beneficial protection. Some of the key benefits to remember are:
- Providing coverage that extends beyond your normal policy limits—all in one policy that covers your home, auto, boat, and other assets.
- Covering libel, slander, and other problems that aren’t typically covered. These legal coverage options are a unique benefit of umbrella insurance that can be crucial if such a hardship ever arises.
- Covering someone anywhere in the world. Most umbrella policies will cover you worldwide, so if you are responsible for damages while abroad, this policy can cover it.
- Starting coverage at a large amount. Since policies start at $1 million, the coverage is significant even with a small policy. Each policy will increase by about a million dollars, so the coverage can be extremely extensive.
- The premium rates are low for the amount of coverage. The coverage is extensive, and the premium costs are much lower than what the policy provides.
To understand the benefits of umbrella insurance, it is helpful to think of a real-life example. If you are at fault in a serious car accident where several people were injured and property was damaged, you have to cover the costs of the medical bills, car repairs, and repairs for things such as telephone poles and trees. Also, one of the injured people was a highly paid doctor who sues you for the wages lost for the months they have to take off of work. You might have $300,000 in liability coverage, but the total costs end up being $550,000. Your insurer will pay the $300,000, but you’re still responsible for the $250,000 left. That’s where umbrella insurance can come in. That policy will then cover the remaining $250,000, protecting your savings and assets and preventing the use of credit.
Who Needs Umbrella Insurance
Umbrella insurance isn’t required for anybody, but it is encouraged for people who have these circumstances:
- Own property.
- Have significant savings built up or large assets.
- Have potential or concerns about liability claims when traveling outside the US.
- Own anything that could cause serious injury. Some of these items include a dog, a trampoline, or a pool.
- Act as a landlord.
- Coach children’s sports teams.
- Serve on boards or committees.
- Participate in sports such as hunting, skiing, surfing, or other sports that can harm others.
- Regularly volunteering.
Though umbrella insurance isn’t required, it is encouraged for most people. Since the premium rates aren’t very high for the amount of coverage, umbrella insurance is a great way to protect your savings and assets without spending large amounts on insurance coverage.
The Bottom Line for an Umbrella Insurance Policy
Insurers provide many different options for an umbrella insurance policy to help protect your assets and cover any damages covered by your policy. The best way to determine the amount of coverage is to assess the savings and other assets you need to protect with your umbrella insurance policy. Contact us today for your free umbrella policy quote to determine the right amount of coverage and find the cheapest umbrella coverage.
