Purpose of Umbrella Coverage
An umbrella policy protects your existing personal assets and future personal assets (like wages or future inheritance) against the cost of losing a lawsuit for another party’s “bodily injury”, “property damage”, or “personal injury”.
You don’t have to be wealthy to need an umbrella policy—even if you don’t have any assets, your wages can be garnished. A $1,000,000 policy typically costs under $200/year.
An umbrella policy provides excess coverage above and beyond what is provided by your underlying insurance. It picks up where your other insurance policies leave off. It has a high deductible because the deductible is designed to be met by your other policies.
What types of plans can be under the Umbrella?
An umbrella policy can cover many other policies. It is important to find out if the policies need to be scheduled to be covered.
Many umbrella policies require a certain minimum limit on the underlying policy in order to umbrella the coverage.
What does an Umbrella Policy Cover?
Umbrella policies help pay for legal fees and judgements for the other party’s medical bills, lost wages and “pain and suffering”.
An umbrella policy provides excess coverage above and beyond what is provided by your underlying insurance.
Protecting Your Dependents
An umbrella policy can also protect your dependent children (for example, if your daughter causes a car accident), any accidents caused by you or your dependent children while operating a watercraft, accidents that occur on rental property you own and personal injury lawsuits arising from slander, libel, defamation of character, false arrest, detention or imprisonment, abuse of process, malicious prosecution, shock or mental anguish.
Legal expenses are typically covered on top of the policy amount. The policy may also pay you if your appearance at legal proceedings causes you to lose pay from work (for example, if you are an hourly employee or if you don’t have any personal or vacation days available). Since the insurance company’s money is at risk when you’re sued, it’ll want to protect that money with its own legal team, possibly a better legal team than you could afford on your own.
Personal Injury Coverage
Personal injury sounds a bit like bodily injury, but it refers to damage to someone’s reputation. In a world where many of us are online frequently, sharing our thoughts about various topics on forums or social media, it’s easy to find yourself on the receiving end of a defamation lawsuit. Note, this endorsement isn’t a permit to attack people online. But, it does provide coverage for unintentional harm. Do you have teenagers online, this will cover their liability too (Vicarious liability).
Coverage for libel, slander, defamation of character, invasion of privacy, wrongful eviction, wrongful entry, and/or false arrest, detention or imprisonment.
As with your other liability coverage, your insurer will pay for your defense costs as well.
Have a long commute Drive during rush hour Drive in the city
Have a swimming pool Have a trampoline
Own a dog Entertain often
This put you at increased risk. Umbrella coverage is recommended.
What is not covered?
Umbrella Insurance provides liability coverage = PROTECTING OTHERS… So it does not cover, damage to property you own. Bodily injury or medical expenses of you or any person who is related by blood, marriage, or adoption and who lives in your home.
A PERSONAL umbrella policy does not cover lawsuits related to a business you own including babysitting (which you are compensated for) . However, your policy may still cover your children if they babysit part-time on someone else’s property.
Certain high risk activities like drag racing. Restitution for a crime you committed. Intentional Acts like intentional bodily injury or property damage, sexual harassment or discrimination.