Personal Umbrella Insurance To The Rescue

November 02, 2017

Why Umbrella Insurance Is Important

Everyone knows an umbrella is a useful, perhaps even essential, protector for our tough New York winters. Evenwhen it's sunny, we all know how quickly things can change and how easy it is to be caught unprepared.

The same thinking applies to insurance protection that bears the same name -- umbrella insurance. It's a way of preparing for unexpectedly high sums that exceed the limits on your standard insurance policies when you make a claim.

Suddenly, this type of insurance is becoming increasingly important as the costs of things like lawsuit settlements, legal defense, accident related medical treatment and auto-crash related damage, go through the roof.

What are personal umbrella policies?

Put simply, an umbrella insurance policy extends the limits of your existing homeowners, auto or boat liability insurance policies.

For example, if you have a liability limit of, say, $300,000 on your auto insurance policy, umbrella insurance might add another $1 million to that total.

Then, suppose you're facing a liability and costs claim of $800,000, your auto policy would pay the first $300,000, then your umbrella policy kicks in to pay the balance.

Those numbers may seem high but, believe us, they're certainly not unusual, especially in the auto insurance claims world, which happens to be where most personal umbrella policies come to the rescue.

Is umbrella insurance the same as excess insurance?

No. You may sometimes hear umbrella insurance referred to as excess insurance but there's an important difference

Excess insurance only provides a top-up to the liability protection in your standard policies. Umbrella insurance often offers protection for some perils that aren’t covered at all in your regular policies.

In other words, umbrella coverage includes excess insurance but it usually covers other items as well and kicks in from the first dollar of costs for these.

These coverages might include claims and lawsuits relating to false arrest, invasion of privacy, malicious prosecution, mental anguish and defamation (libel or slander).

Umbrella policies often also cover legal expenses in addition to their policy cash limits. This is quite important because it means your insurer can appoint a legal team you might otherwise not be able to afford to defend your interests.

How important is personal umbrella insurance?

As things stand, without umbrella insurance, when the limits of your homeowners insurance, auto insurance or boat liability insurance policies are reached in a claim, that's it. The balance of costs, which could run into hundreds of thousands of dollars, must be met from your own pocket.

Given the extra protection it provides, umbrella coverage is remarkably inexpensive at around $200 to $300 a year for the first $1 million and then as little as $50 to $75 per year for each additional million dollars of protection. It makes sense to buy umbrella insurance that, as a minimum, covers your net worth.

Most insurers will insist you already have $250,000 or $300,000 of existing liability protection for auto insurance and homeowners insurance (or renters insurance) respectively. In most cases, they'll only issue umbrella coverage if they also provide these standard policies.

Note also that umbrella insurance does not cover excess costs relating to damage to your own car or property. Your existing standard policies should cover you for these risks.

Nor will it kick in if you have to pay liability restitution for damage or injury you caused while committing a crime (such as DUI).

So, who needs personal umbrella insurance?

When personal umbrella insurance first appeared in the 50s and 60s, it was mainly bought by high net worth customers. But these days, anyone wanting to protect their assets, including their home, might want to consider it.

For example, it may be that an older driver might consider they're more at risk of being in a collision than younger drivers. Or you may be a homeowner with a significant amount of personal property that might be at risk in a liability lawsuit.

Other factors that might place you in a higher risk category might be if you have one or multiple dogs (because of the liability risk of dog bites), if you have frequent visitors to your home (increasing the risk someone will get injured) or you drive a long commute in busy traffic (higher risk of a collision).

Even if you're one of those enthusiasts who blogs or frequently posts reviews of products, vacations and other experiences online, you could be at higher risk of being sued for slander.

And even if you don’t have valuable assets to protect, a lawsuit judgment against you could result in your future wages being garnished to pay off the settlement.

How can I find out more about personal umbrella coverage?

Talk to your insurance agent to explore whether personal umbrella insurance is right for you. It all comes down to the assets you need to protect and the risks you face.

And when you're buying umbrella insurance, make sure you know exactly what the policy covers first. They do differ from one insurer to another. Again, a good agent should help you select the insurer and policy limits that are best suited to your needs.

The insurance professionals at Newbridge Coverage can help. Just email or call us at 526-781-9000.