It seems everyone has heard of a Personal Umbrella, but most people don’t understand what they do.
Let’s say you own two cars, a house and a boat. Your auto, home and boat policies each have a liability limit. If you are sued for more than those policies will cover, then your umbrella kicks in and pays. This prevents you from paying out of pocket on a large claim.
In most cases, the umbrella follows the auto policy. The best case scenario is to have all of your coverage with the same insurance company. This way, when you alert the underlying carrier of a claim, your umbrella is automatically put on notice. There are scenarios where your umbrella will be with a different carrier. In those cases, you’ll need to report the claim separately to your umbrella carrier.
“How much umbrella coverage do I need?”
We get this question all the time. There is really no good answer. A personal umbrella is there as the last line of defense between you and a law suit. Ideally you’d want your Liability Limit to be equal to the most you’ll ever be sued for. Since our crystal ball is broken, you’ll have to exercise some judgement. The more assets that you have to protect, the more valuable an umbrella is.
Not all umbrellas are created equal. All excess policies will provide liability in excess of your underlying policies (Home, Auto, etc..). A true umbrella will also drop down to become the primary policy for certain exposures. For instance, if you don’t own a boat, then you would not have boat insurance. If, however, you rent a boat, a true umbrella would become a boat liability policy while you rented it. An excess liability policy would not.
Personal Injury Liability Insurance covers you for lawsuits filed over issues like defamation, libel, slander, false arrest, unlawful imprisonment and malicious prosecution. These types of claims are more and more prevalant since the dawn of social media. For landlords, privacy concerns and ulawful entry can also be included.
Some umbrellas will only provide this coverage if it’s already on your underlying home, renters, condo or other policies.
When your umbrella policy pays a claim that is not covered by your underlying policies (such as home or auto), then you are responsible for paying the Self-Insured Retention. It is typically a small amount that acts as a deductible. Your umbrella policy then pays for the loss amount exceeding your retention.
Your umbrella can either include defense costs, or defense costs may be outside the limit. Defense costs inside the limit may sound like a good thing. But in reality defense costs outside the limit is a much better option.
If your defense costs are inside the limit, that means the money to pay your lawyer is coming from your umbrella limit. So if the defense costs a lot, then it could use up the entire umbrella. If defense is outside the liability limit, that means that while you are being defended in court, your liability limit remains intact and the full amount is available if you lose the case.
Which umbrella insurance solution is right for your family?
Use the yellow hot spots and explore how umbrella insurance can help add an extra layer of protection.
Property Damage Liability
You can be held responsible if you significantly damage another vehicle and/or property. Do you have enough coverage to protect yourself from the risk?
Your standard auto policy limit could easily be exhausted if you are found to be at fault. An umbrella or excess liability policy provides an extra layer of protection once your standard liability limits are exhausted. It’s a cost-effective way to ensure the peace of mind you deserve.
Bodily Injury Liability
It’s easy to get distracted while driving. All it takes is an incoming text message, a fussy baby, or changing the radio station and your eyes are off the road long enough to crash into a pedestrian, bicycle, or another vehicle. As an owner/operator of the vehicle, you may be held financially responsible for any bodily injuries caused as a result of the accident.
An umbrella or excess liability policy helps extend your coverage to better protect you against these significant costs. It’s the ideal coverage to provide peace of mind, even when the unthinkable happens.
You invite guests over for a pool party and one of your guests dives into the shallow end of the pool and is permanently injured. They hire a lawyer to represent them and after a long legal battle, you and your family are left financially responsible for their injuries. Do you have enough money in savings to cover your legal responsibilities as well as the legal defense costs?
An umbrella or excess liability policy increases your personal liability limits by adding protection over and above your current auto, boat, or homeowners policies - providing real financial value, as well as priceless peace of mind. Excess liability insurance is available either by an endorsement to your homeowners policy or available as separate coverage.
Accidents can happen to anyone at any time, even those who have been out on the water for years. Personal watercraft insurance is a necessity, but sometimes the limit these policies provide isn't enough.
Your standard watercraft policy limit could easily be exhausted if you are found to be at fault for property damage or personal injury. An umbrella or excess liability policy can extend those limits, providing you an additional layer of financial protection.