Coverage in Addition to Homeowner's Liability

An umbrella policy is excess liability insurance coverage over and above that which is covered by basic homeowner or automobile insurance.  In picking up where homeowner and automobile policies leave off, it is an extra layer of protection against lawsuits resulting from damage to someone else's property or injuries as the result of an accident.  It also protects against false claims and intentional acts such as libel, slander and vandalism by minors, and covers false arrest, wrongful entry, invasion of privacy and more.

Lawsuits abound.  Incidents such as an auto accident in which youre sued under your auto insurance policy; or in which your neighbor falls on your property and youre sued under your homeowner's insurance; or even a natural disaster in which a tree on your property crashes down on a neighbor's vehicle or home are becoming more and more prevalent. The amount that juries award in these cases are often unpredictable and expensive.

It is a good idea for those who have underlying wealth and assets that need to be shielded against such lawsuits to consider an umbrella policy.  If you have average assets and low risk exposure, you most likely do not need the additional coverage an umbrella policy offers. But, if you have substantial income, whether your assets are built up or not, or if your lifestyle exposes you to higher lawsuit risks, an umbrella policy may be well worth your investment.  Even officers or board members for not-for-profits may be sued for the activities their organizations are involved in.

A good question to ask yourself is whether you have assets that you don't want to put at risk in the event of a catastrophic liability.

What You Should Know Before You Buy

The premium costs of an umbrella policy are usually much lower if the policy is purchased from the same provider with which you hold your automobile and homeowner's policy.  The average cost for most umbrella policies is approximately $200 to $300 a year for about $1 million in coverage.  The policy holder is usually required to have $250,000 to $300,000 in base liability coverage under your homeowners insurance policy, as well as a minimum automobile policy of $100,000 to $250,000 per person, and $300,000 to $500,000 total occurrence for bodily injury and $100,000 to $250,000 for property damage.  This amount varies among insurance carriers.

Umbrella Limits

A somewhat misunderstood coverage, umbrella liability is sold in $1,000,000 increments that provides coverage limits in excess of your home and automobile liability limits. 

How It Works

Example:  assume that you have $500,000 of liability limits on your auto policy and you are involved in an accident which you are deemed negligent.  If the lawsuit results in a settlement to the claimant of $800,000 and you have no umbrella coverage, you could have your wages or other assets attached for the difference.  If you had a $1,000,000 umbrella you would have had up to $1,500,000 of available coverage.  Should your homeowner limits of $500,000 be exhausted as a result of a dog bite slip and fall or other personal liability claim, and you had a $1,000,000umbrella, your total coverage for that claim would be $1,500,000. Keep in mind a few things when determining what limits might be appropriate for you; how many youthful operators, swimming pool, trampoline, dog,# of owned properties owned etc. Our rule of thumb is, if your assets exceed $1,000,000 you should consider buying $2,000,000 of Umbrella coverage.

IMPORTANT: THE HOME AND AUTO LIMITS NEED TO BE AT A CERTAIN LEVEL TO AVOID A GAP IN COVERAGE.  YOU ARE ADVISED TO PROVIDE US WITH A COPY OF YOUR POLICY TO INSURE YOUR LIMITS ARE ADEQUATE.