Umbrella insurance is a type of excess liability insurance that kicks in when you or members of your household are held liable for claims that exceed the limits of your underlying liability policy, such as home, auto, and watercraft policy. Umbrella insurance also covers some liability claims not covered by the basic policies including false imprisonment, slander, and libel. Additionally, if you’re a rental property owner, umbrella insurance will provide you with liability coverage over and above what your renters’ insurance provides.
What Does It Cover?
Umbrella insurance kicks in when:
- Your child breaks another kid’s nose at school while in a fight, and the kid’s parents sue you.
- Your dog viciously attacks a neighbor and injures them. If they sue you for pain and suffering, lost wages, and medical costs, your policy can kick in to pay for damages that exceed your homeowners’ insurance.
- You are held liable for an accident involving multiple vehicles, and your auto insurance liability coverage isn’t adequate to cover the property damage and personal injuries resulting from the accident.
Umbrella insurance also covers the invasion of privacy, wrongful entry, malicious prosecution, and other hazards. While umbrella insurance can cover the policyholder’s family members, there are limits to the extent of coverage. Another key umbrella insurance policy benefit is that you can be covered internationally, except for vehicles and property owned under other nations’ laws.
Do You Need Umbrella Insurance?
In a sue-happy nation such as the U.S., anyone can be sued for anything leading to their financial ruin. So everyone needs umbrella insurance. However, some people engage in activities that expose them to a greater risk of excess liability. Excess liability risk factors include: renting out a property, hosting large parties, employing household staff, having a high profile, serving in a non-profit board, and owning a hot tub or trampoline.
Having a swimming pool on your property, having a teen driver in your household, and owning a potentially dangerous dog can also increase your lawsuit risk. The more exposed you are to lawsuits, the more you need to carry an umbrella policy.
How Umbrella Insurance Works
Suppose you’re at fault for a car crash that leads to multiple people being injured, and the medical bills amount to $500,000, which is more than your auto policy’s $300,000 personal injury coverage. In that case, your umbrella insurance will kick in and cover the $200,000 balance. Additionally, if one of the injured persons is a high-earning professional and they sue you for $500,000 in lost wages, your umbrella policy can cover that. Without an umbrella policy, your assets and savings will be on the line because your auto liability insurance will, at that point, be exhausted.
What Does Umbrella Coverage Cost?
According to Insurance Information Institute (III), an umbrella insurance policy with $1,000,000 coverage costs between $150 and $300 annually. You’ll likely add about $75 annually for $2,000,000 coverage and $50 annually for every $ 1 million additional increments in coverage.
What Isn’t Covered
- Business losses
- Intentional criminal acts
- Oral or written contracts
- Damage to your belongings
- Intentional act
- Damages due to war, terrorism, or nuclear radiation
- Communicable disease
Umbrella insurance protects you from excess liability that can ruin you financially. At Pittman Insurance Group, LLC, we can help you discover risks that you may not be aware of and find customized umbrella insurance that suits your unique coverage needs. Contact us today to get started!