Protect Yourself with an Umbrella Policy

In addition to reviewing and updating your insurance program regularly, you can avoid possible gaps in your coverage by purchasing a personal umbrella policy. Once used only by high net worth individuals, personal umbrella policies have now become an option for anyone who may need extra liability protection.

In our society, the need for liability protection is real. A personal umbrella policy expands the liability coverage you already may have through your homeowners and/or automobile insurance policies, in addition to protecting you from certain unforeseen circumstances.

How Much Is Enough?

How much liability coverage is enough? There is no easy answer. No one can predict the value of a lawsuit against you or the amount of damages a jury might award the prosecutor. Often, juries are willing to award more or less to an accuser based on an established precedent. At other times, an insured’s lifestyle (whether it is expensive or modest) may influence a jury. Hence, a definitive assessment is difficult.

However, the obvious reason for buying an umbrella policy is to obtain coverage with limits high enough to protect yourself from the risk of a large liability claim. Umbrella policies typically provide liability limits in increments of one million dollars. This coverage “stacks” on top of underlying policies, such as homeowners, automobile, or watercraft. The umbrella also fills gaps in and between the underlying policies. For example, if you were in an automobile accident in Mexico, your primary auto policy may not provide coverage. However, an umbrella policy might because coverage is often worldwide. Umbrella policies also might cover property “rented to, occupied by, used by, or in the care of the insured” over and above the rather restricted limits of a homeowners or condo policy. For example, suppose you rent a beach house. While carrying in your groceries, a bottle of bleach spills and ruins the carpet of the house. Your homeowners policy might provide a $500 coverage. If the damage is actually worth $2,000, your umbrella policy can fill the gap.

What’s Covered?

An umbrella policy covers “personal injury” and “property damage” after a deductible and/or “underlying” limit on a claim have been exhausted. An umbrella’s definitions are generally much broader than those in the underlying homeowners or auto policy, and coverage is often far more generous.

However, there are exclusions. Some exposures that are typically excluded may be the insured’s own property, workers compensation, intentional acts, aircraft, watercraft (exceeding certain size and horsepower limits), business activities, professional liability, intrafamily suits, and communicable diseases.

In order to qualify for an umbrella, you may have to meet certain requirements. For instance, you might need to purchase higher liability limits on your current auto and homeowners policies in order to satisfy the umbrella’s underlying requirements. If you have youthful drivers on your policy, numerous traffic violations, or own a vacation home or a boat, you may find it more difficult to obtain a personal umbrella policy.

However, it is certainly worth the effort. Should you ever find yourself faced with a lawsuit, any gaps in your current liability coverage could end up costing you. A personal umbrella can help you to effectively fill those gaps in coverage. For more information on umbrella policies, please call us or stop by our office.



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