UPDATED: Mar 13, 2020
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Insurance is something that nearly everybody needs in some way – whether it’s on their automobile, their home or even their life. While most types of insurance policies are well known, there are a few that exist that can provide huge amounts of value at a low cost, such as personal umbrella insurance. Purchasing umbrella protection on top of your existing insurance policies can save you incredible amounts of money (should an accident or lawsuit occur that depletes existing insurance coverage). Let’s take a look at personal umbrella insurance and try to shed some light on why this is one type of insurance coverage that every person should at least look in to.
Continue reading our article to learn more about:
- What personal umbrella insurance is and how it works
- Key things to look for in your personal umbrella insurance policy
- What personal umbrella insurance covers
- What types of coverage personal umbrella insurance provides
- What personal umbrella insurance does not cover
- Why everybody should look into buying this type of insurance
What Is Personal Umbrella Insurance?
Essentially, an umbrella insurance policy provides coverage above and beyond existing liability insurance policies that you already own. As the name implies, personal umbrella insurance provides an “umbrella” of additional liability insurance coverage, above and in addition to all of one’s current insurance.
For example, someone who has $50,000 in property damage liability coverage as part of their auto insurance can purchase a $500,000 personal umbrella insurance policy that will extend the total coverage amount on the original PDL to $550,000 total. Moreover, the $500,000 personal umbrella insurance policy will also apply directly to the person’s other insurance, so if they had a $500,000 homeowner’s insurance policy, the umbrella insurance effectively doubles the total coverage to $1,000,000. The key point to remember is that personal umbrella insurance protection will only kick in once the original insurance coverage has been exhausted.
As umbrella insurance is intended to cover additional expenses beyond regular insurance coverage, many insurance companies will require that you have at least home and auto insurance before you can purchase an umbrella insurance policy. Most insurance companies offer personal umbrella insurance policies at around $1 or less per day, making this one of the most affordable types of insurance available. While you can purchase your umbrella insurance through the same company that you buy your other insurance policies through, some experts actually advise against this, claiming that it’s better to hold insurance with different companies than to have everything through a single carrier.
What To Look For When Buying This Type Of Insurance Coverage
An important thing to investigate when considering an umbrella insurance policy is the deductible. Typically, the deductibles on umbrella insurance policies are very high, running as high as hundreds of thousands of dollars. However, if circumstances arise which cause you to need to use your umbrella policy your primary insurance will generally cover the deductible so you won’t have to pay it out of pocket.
In regards to asset protection, umbrella insurance by definition only provides coverage to items that you already have liability insurance for, such as your home, automobile, and other large assets. Depending on the insurance provider, a personal umbrella insurance policy may also cover a range of other areas that you don’t currently have an insurance policy for, including interesting situations like false arrests, slander, and libel. One insurance company recommends that anyone owning assets totaling more than $200,000 should have personal umbrella insurance coverage; others who should absolutely consider purchasing an umbrella insurance policy are those who own a business, and those who have dependents.
What Does Personal Umbrella Insurance Cover?
Up above, we mentioned that umbrella insurance policies go above and beyond existing liability policies. Umbrella insurance provides an “umbrella” of additional liability insurance coverage above and beyond your current insurance policy.
Here are some of the crucial things covered by umbrella insurance:
- Damage to property
- Certain lawsuits
- Personal liability situations (more about this below)
You may think that you’re already covered for a lot of these situations. Doesn’t ordinary liability insurance cover injuries and damage to property? That’s true! However, umbrella insurance goes above and beyond the limits of your basic liability policy. It also covers certain situations that aren’t covered by other types of policies.
Types of Coverage Provided by Personal Umbrella Insurance
We just mentioned that umbrella insurance covers personal liability situations beyond your basic liability policy. Below, you’ll find some of the situations covered by umbrella insurance, including:
Bodily Injury Liability: Umbrella insurance can significantly raise your bodily injury liability. This covers the costs of damages you inflict to another person’s body. It can include medical bills caused during a car accident, for example, where you were at fault. It can also include damages your dog inflicted on another person, or injuries sustained by a guest in your home when they fell off a step.
Property Damage Liability: Property damage liability covers the cost of damage or loss to another person’s tangible property. This can include coverage for damage to vehicles and other property as a result of an auto accident where you were at fault. It can also include accidental damage to a school or business caused your child.
Owners of Rental Units: Owners of rental units may choose to buy umbrella insurance policies to help protect against liability. If someone trips over a crack in the sidewalk in front of your rental unit, for example, then your umbrella insurance policy may cover any damages claimed in the individual’s lawsuit. Umbrella insurance can even cover damages inflicted by your tenant’s dog against guests on the property.
Other Situations: Umbrella insurance can also protect you against a number of other situations, including slander, libel, false arrest, malicious prosecution, shock, and mental anguish, and other personal liability situations.
What Isn’t Covered Under Personal Umbrella Insurance?
Personal umbrella insurance doesn’t cover anything. Some of the key exceptions to personal umbrella insurance include:
- Personal belongings
- Intentional or criminal acts or omissions
- Written or oral contracts
Why You Need Personal Umbrella Insurance
It may seem like personal umbrella insurance policies are only for the rich, or for people who have a lot of valuables to insure, but this way of seeing things isn’t entirely accurate. For example, those who live in the 38 states that operate under the tort system for auto insurance can be subject to massive injury claims and lawsuits should they cause an accident. With today’s high medical treatment, legal defense and associated costs, one can quickly exhaust the auto insurance coverage that they purchased, leaving every additional dollar to be paid out of pocket. When used as a safety net, personal umbrella insurance policies become an affordable way to purchase a comprehensive form of insurance that protects you in case things go poorly.
There’s little doubt that personal umbrella insurance policies have saved individuals anywhere from a few thousand to many hundreds of thousands of dollars, depending on the circumstances. The challenge with personal umbrella insurance lies in trying to predict how much insurance you will need, and when you think you might need it. Personal umbrella insurance policies can be a difficult decision for those who are on a somewhat tight monthly budget, as they are an additional expense that doesn’t really offer a tangible sense of value. However, as anyone who has had to use a personal umbrella insurance policy can attest to – when you need to use this insurance, it’s very handy to have and can save you far more than it costs. If in doubt, speak to someone you know with personal umbrella insurance or talk to an insurance agent who can you determine exactly where you need the additional coverage that an umbrella insurance policy offers.