The term "umbrella insurance" is used by insurance providers to reflect additional coverage not included in standard policies for certain conditions. This policy exceeds the limits of both standard auto and homeowners policies to provide additional coverage. Although no one is required to have this extra coverage, it's handy for homeowners who plan multiple events with guests.
Here's a closer look at umbrella insurance and whether or not you need it.
Anyone who buys insurance should consider this type of blanket coverage. The major reason to get it is that it prevents you from paying for expensive medical or legal services out of your own pocket. It protects you when you cause a serious accident that injures others. It also protects you if someone is injured or becomes ill on your property.
The coverage can extend to household members who do not have their own auto or property insurance. So, if you have several kids and pets, it's sometimes a good idea to get extra coverage due to all the possible damage they might accidentally cause.
When a standard policy reaches its liability limits, a personal umbrella insurance policy provides extra coverage for bodily and personal injuries. It also extends limits of property damage and landlord liability. It's up to you as a policyholder to set your coverage limits based on your concerns, experience, and expectations. Some people use umbrella insurance to extend certain types of basic coverage, while others use it as a safety measure to protect assets against unexpected disasters.
An umbrella policy can save hundreds of thousands of dollars you might be liable for if the cost of an auto accident exceeds coverage limits. If your auto insurance plan, for example, only covers up to $100,000 in damages and you cause a more expensive accident, umbrella coverage can pay the balance. The umbrella coverage might also pay for liabilities caused by your kids if they post something emotionally harmful online about someone.
An umbrella policy usually does not cover things that are already covered in a standard policy, such as personal belongings. It also doesn't cover business losses, criminal acts, or omissions. Written or oral agreements are also out of it. Regardless of how an umbrella policy is pitched, it only covers a limited number of things. If the policy doesn't seem clear, ask your insurance agent about it to make sure you understand what it covers.
Your standard homeowners policy covers damages you do to other people's property but doesn't provide coverage when you damage your own property. That's another way umbrella insurance can help, as it can pay for accidentally broken windows. It can also pay for when you forget to turn the bathtub water off, and it overflows, causing damage to your own property and your neighbor's. This coverage, however, does not kick in until standard policy limits are exhausted.
If you run a home business, any type of business loss generally is not covered and requires separate coverage beyond an umbrella policy. It also won't cover business liabilities such as lawsuits. Some insurance companies do offer umbrella coverage for business, but it's separate from personal coverage. To make sure your home business equipment has the full coverage you need, it's best to discuss your situation with an insurance professional who might suggest ways to bundle your coverage at a discount.
Umbrella policies, like all insurance plans, only cover so much. They won't cover any type of illegal activity, whether it was intentional or not. It won't bail you out of jail, nor will it cover restitution if you are convicted. Intentional actions such as playing a prank on a neighbor then realizing it was a mistake will not be covered.
While some laws protect oral contracts, umbrella insurance cannot cover any liabilities of oral or written agreements. For example, your umbrella policy probably will not cover damages caused by a handyman to fix your roof, regardless of the oral or written agreement. Many homeowners try to cut corners on costs by hiring unlicensed or uncertified friends but then are stuck with high repair bills due to improper installation. Umbrella insurance will not help ease this financial problem.
Even though umbrella insurance is sometimes called "excess liability insurance," the two concepts are separate. Each insurance agency designs its own plans. Usually, "excess liability" is an extension of coverage for the same risks mentioned in the policy. However, it often doesn't provide coverage for additional risks that typically aren't covered in standard plans. An umbrella plan, by contrast, pays for additional risks.
Umbrella insurance policies are not required but can become very helpful if a severe accident significantly drives up costs. The key is to meet with an experienced insurance expert who can help guide you toward making appropriate coverage decisions. Contact us at Fuller Insurance to learn more about how to protect your personal assets.
