Why Umbrella Insurance Is Important
Everyone knows an umbrella is a useful, perhaps even essential, protector
for our tough New York winters. Even when 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
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
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 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
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.