Umbrella insurance is an insurance policy that provides an extra layer of liability coverage when you need it. Homeowners seek such coverage to handle significant claims and to thwart lawsuits. Your homeowner’s insurance can only go so far, while an umbrella policy offers added coverage.
Since coverage only takes effect after the limits of the primary policies are exceeded, umbrella insurance is classified as a type of ‘secondary’ coverage, and is therefore significantly less expensive than conventional full coverage insurance policies.
Umbrella insurance extends the personal and business coverage capabilities for two main types of claims – bodily injury liability (i.e. – injuries caused by neglect or improper conduct, including personal injuries) and property damage liability (i.e. – damage caused by tenants or employees).
The term “umbrella” is used because the additional coverage can be applied to multiple insurance policies simultaneously, providing overall protection, similar to a large umbrella being used to protect several people.
An umbrella policy effectively raises your liability coverage provided elsewhere e.g., your home, your cars, and your boat. Umbrella coverage kicks in once your liability coverage has been tapped elsewhere.
Should you get sued, your umbrella policy would handle claims made against you. This can include someone falling down on your property, a libel suit and coverage for claims made on property that you rent out.
Besides the coverage mentioned previously, an umbrella policy can cover the cost of injuries someone sustains when they are in an automobile accident and where you are at fault. Your auto insurance provides bodily injury liability, but there are limits. An umbrella policy goes beyond that to cover medical bills and lawsuits.
An umbrella policy also covers loss or damage done to another person’s tangible property. If you hit a house with your car and it catches fire and burns down, you are covered. If your pet jumps in your neighbor’s car and manages to disengage the parking brake and it rolls into the street hitting another car, you are covered. If your son or daughter damages someone else’s personal property, such as a garage, you are covered.
What You Said
The term “umbrella policy” suggests more comprehensive coverage than typical insurance. That assumption is correct.
For instance, if you trash your neighbor in a written statement to the newspaper editor and that information is published, you can be sued for libel. If you perform a citizen’s arrest on someone with false pretenses, you may be charged with a false arrest. Slander, shock and mental anguish are some other reasons why you can get sued. And for big bucks too.
An umbrella policy may not be fully understood or appreciated until it is needed. But, why wait until then? You need to know what it covers and whether you need a policy for yourself.
Now back to the bodily injury example given earlier. If your coverage is for $500,000 and someone is injured and your personal fault is determined, then your auto insurance would kick in. However, if the medical bills exceed the limits, let’s say totaling $1,000,000, then you are responsible for paying the $500,000. Unless you have an umbrella policy. In that case where the one insurance is exhausted, the other picks up the slack.
Most insurers offer an umbrella policy and coverage amounts typically begin at $1,000,000 and go up from there. Your insurer can talk to you about risk, recommended amounts and the coverage that is right for you. Yes, you can find coverage for $5 million, $10 million or more. And you will usually need to have your homeowners and auto insurance underwritten by the same company offering you umbrella coverage.
Can you do without umbrella coverage? Should you? That answer is a resounding no if you have assets and want to protect yourself from the unexpected. And the unexpected is what insurance coverage is all about.
Looking for Umbrella Insurance?
Purchasing Umbrella Insurance is an excellent way for small businesses and individuals to protect their assets against serious claims. For the most part, umbrella insurance makes sense for high net worth individuals as well as larger businesses, as small businesses and individuals can usually obtain sufficient liability insurance through a regular liability insurance policy.
What Exactly Does Umbrella Insurance Cover?
Umbrella Insurance will protect against all liability claims that your auto insurance, homeowners insurance, and public liability insurance would cover.
So basically, anything that your primary insurance would normally cover, umbrella insurance covers the exact same thing, but only after your primary insurance cannot pay out any more claims.
Keep in mind, the more things your regular insurance policy covers, the more things your umbrella insurance will cover.
Keep in mind though, your umbrella insurance premiums are based on the amount of extra coverage (Umbrella insurance is typically purchased in increments of $1 million in additional protection), as well as the type of business you run (If you’re purchasing a policy for a business). A business that’s more likely be to sued will have to pay higher premiums than a business that likely will not be sued.
Do I need Umbrella Insurance?
The purpose of umbrella insurance is to protect a business or individual’s assets from paying out claims in case their regular primary insurance policy reaches its maximum yearly payout.
A business would need umbrella insurance to protect itself from accidents that could potentially be more than their policy can cover.
In most cases, businesses wouldn’t have to pay too much out of pocket for any liability claims, as their primary business liability insurance would have them covered, but these policies have maximums and in the event of a serious accident, simple business insurance won’t be able to settle all claims. In a situation like this, having umbrella insurance would pay off.
Individuals may want to look into umbrella insurance if they want to be on the “safe side” of things. Most auto insurance policies cover upwards of $500,000 in liability damages, but anything after the policy limit, the policyholder has to pay out of pocket.
A car accident can cause over $500,000 in damages if the accident is severe, and the only way an individual can protect himself would be to have an auto insurance policy that covers huge amounts in damages or umbrella insurance.
In most cases, Umbrella Insurance would be more economical than having to purchase homeowners and auto insurance with high liability protection.
Personal Umbrella Insurance
Insurance can really be expensive today, especially when you’re not covered correctly. The personal umbrella insurance is a separate policy in addition to what you should already have in place now for your liability insurance.
This policy will basically help you in covering additional costs in which your original policy will not. It’s called umbrella because whether you need additional coverage for your homeowner’s, or auto, or rental liability insurance, this can be the policy to cover all of them, like an umbrella.
The costs of the umbrella policies are generally very reasonable in consideration of what they can actually pay on your behalf in a single claim.
Having A Car Accident
Your life savings can easily be lost in a lawsuit because of your inadequate insurance. For example, if you are having a fault in an auto accident and the other party has medical injuries to deal with, you are responsible.
We all know how costly hospitals and doctors and ambulances are today and how it doesn’t take long for the bills to reach thousands and thousands of dollars.
Most car insurance policies have a maximum of $250,000 for medical expenses. This is sufficient if it’s a minor fender bender.
However, what if there’s a van full of people who need major medical care? What if 5 people in the van each need $100,000 in care totaling $500,000, and you covered for only $250,000?
Yes, you will pay out of your checking account the additional $250,000 your policy doesn’t cover. That is unless you have arranged with your agent to set you up with the umbrella policy to cover the additional costs.
Could you imagine in the unfortunate situation of a death involved due to your negligence of an auto accident? The standard $250,000 is definitely not going to be sufficient for life and a lawsuit will surely have you at fault for maybe millions of dollars. Say goodbye to the house, stocks, bonds, savings, unless you have your self protected with the personal umbrella policy.
Buying Insurance Policy Is A Waste Of Money?
Some people have said that wealthy Americans are better off investing money than wasting it on insurance policies. Well, times have changed greatly, and so have hospital costs and judgments from the courts.
With the personal umbrella policy being in addition to the one which you already carry, the costs are extremely minimal in comparison to what you could lose without having it.
Normally this additional coverage will only cost you a couple of hundred dollars a year. So if you are paying out say $250 for your coverage, for 10 years of coverage, you will be paying approximately $2500. And for 20 years of coverage, just $5000.
What a time span of coverage for this little money. If you are driving in the snow and ice and accidentally hit a jogger or a car that is full of kids, let us hope for yours and their sake you have this personal umbrella liability coverage.
With the normal $250,000 maximum coverage, what if the party you are at fault too has cost over $1 million? You will sell what you have too in order to satisfy their claims for the excess of $750,000.
Whether it’s your child’s future college tuition or your home that just got paid off or your stock portfolio they can use also. What a deal this policy has, right? How long would you have to put $250 a year in the bank in order to payout $750,0000? You are right, more than a lifetime.
Don’t gamble what you have acquired over your lifetime without having this coverage for just a couple of hundred dollars a year. For what you can spend at a restaurant one time for dinner and a bottle of wine, you could have a year of coverage for you and your belongings. This is especially true for high-net-worth individuals, as they have the most to lose.
Read also: PPI Claims Can Be Made Without Middlemen
Business Umbrella Insurance
Every business out there needs some sort of insurance coverage. Insurance is purchased by a business on a speculative basis, to cover unforeseen costs that would be catastrophic if the business had to pay for them at the time of an incident.
In simplest terms, insurance covers what you wish does not happen, in the unlikely event that it does. Most businesses opt to purchase umbrella business insurance policies.
If your business is a growing business, or you are looking to expand, an umbrella policy may be a wise purchase toward your future. Once the domain of large commercial businesses, an umbrella policy is now available for any size and type of business.
Umbrella Business Insurance Policies Can Help To Protect Your Business
Most businesses today have some sort of liability insurance. Umbrella business insurance policies protect businesses from costs that exceed their regular insurance limits. Some such incidents include workplace violence, workman’s compensation, and trademark lawsuits.
For example, if your general liability policy covers up to $300,000 in damage and an incident occurs that is $700,000 in damages, an umbrella business insurance policy will cover the additional $400,000.
The business umbrella insurance only “kicks in” once your regular policy is exhausted, in this example, once the $300,000 liability insurance policy is exceeded, the umbrella insurance begins to kick-in.
You may be concerned that covering your business with a business umbrella insurance policy will be expensive. Depending on the type of business you have, it could be, but more than oftentimes, it isn’t.
The costs of coverage are determined by how much coverage you are purchasing, how much the principal’s personal liability might be (for example, were you ever convicted of a criminal offense) and the rates given by the company providing the coverage.
Like anything else you may purchase, it’s wise to shop around and compare what other companies have to offer before you settle on one coverage portfolio.
In order to get the best possible rate above what you will find comparison shopping, it’s a good idea to purchase your umbrella business insurance policy from the same agent or group that covers you for liability.
Umbrella business insurance policies are universally considered a smart business decision and a good value because significant amounts of coverage can be purchased for relatively low premiums.
One popular estimate is that a business can expect to pay five to eight percent of the liability coverage cost for an umbrella business insurance policy.
In order to obtain coverage, a business will need to furnish their insurer with the particulars of their business, such as the nature of the business, the types of businesses you do business with and a basic accounting of the assets and liabilities.
As with personal insurance, businesses deemed to be of higher risk are charged higher premiums than those that are not. Some businesses, such as the pharmaceutical industry, are more expensive to insure than a local Mom and Pop business.
While no policy can cover every possible occurrence that can happen to a business, an umbrella policy will cover most of them. In a world of few guarantees, an umbrella business insurance policy is about the closest thing that exists to one.
Umbrella Insurance Pros and Cons
Everything has its pros and cons. There is no exception for the umbrella insurance. If you are looking for such insurance coverage, you can take a look at the following pros and cons of an umbrella insurance policy:
Purchasing umbrella insurance is the cheapest and easiest way to obtain comprehensive coverage. In fact, $1 million of secondary coverage can be purchased for only about $150-$350/year, and each additional million dollars of coverage costs only $50-$100 (depending on the particular insurance provider and policy).
Aside from allowing you to save hundreds of dollars in annual insurance expenses, umbrella insurance also fully protects your assets and minimizes the possibility of having to pay for repairs or replacements out of your own pocket.
These money-saving, risk-mitigating, and coverage extending benefits are the primary cause for the recent rise in popularity of this insurance type.
Unfortunately, umbrella insurance is not capable of extending all types of coverage for all insurance policies or claims.
For example, an umbrella insurance policy would not provide additional coverage for claims made against business owners pertaining to clerical errors, omissions, and other matters of professional liability.
Likewise, umbrella insurance would not extend the coverage of a personal insurance policy in the event that a claim is made as a result of intentional behavior or business-related activities.
Aside from these coverage limitations, it is also important to consider the fact that the additional coverage may never be needed, and could, therefore, be an unnecessary expense.
Afterall, umbrella insurance is an unbeatable value for both businesses and individuals. For the business owner, umbrella insurance offers extra protection for the employer’s liability and general liability policies.
For the personal insurance policyholder, umbrella insurance extends the coverage of common insurance types like automobile and homeowners insurance.
Despite the fact that extended coverage may never be needed, paying a couple of hundred dollars extra per year is a small risk to take when considering the potential cost-saving benefits.
Although umbrella insurance, in general, is a great value, not all policies are the same, so it is important to shop around thoroughly and compare terms and premiums from several prospective insurance providers before choosing a policy.
The Coverage Cost
Everyone knows to grab an umbrella when it is supposed to rain but some businesses get soaked by not preparing for a disaster by purchasing umbrella insurance.
Umbrella insurance costs vary from policy to policy and the coverage goes above and beyond a regular policy. Take this example for instance: John has a homeowners insurance policy with a limit of $500,000 and an auto insurance policy with liability limits of $700,000.
A million-dollar umbrella changes John’s limits to $1,500,000 for a homeowner’s insurance claim and $1,700,000 for an auto insurance claim.
So why would someone choose to spend the extra money to purchase umbrella insurance and undertake umbrella insurance costs?
Unfortunately, the amount of lawsuits filed has increased over the years and umbrella insurance can assure that you will be able to pay for expenses like an injured person’s medical bills, physical therapy, and lost wages.
Not only can umbrella insurance cover those costs but it can also provide coverage for a legal defense representative. What types of information are needed for an umbrella insurance policy?
Well, of course, basic information like name, birthdate, etc. but you will also need to provide information on the property you own like a home, automobile, rental units, etc.
Umbrella insurance costs vary from policy to policy and the coverage goes above and beyond a regular policy. One tip that some businesses take advantage of is to make sure an umbrella deductible coincides with the existing home and automobile insurance. A business can do this by buying all three policies from the same insurer.
So how much Umbrella Insurance coverage would you need to protect your home or business?
The first thing you will want to do is to add up your assets. That includes the money you have in the bank, any stocks and/or bonds you may own, any 401 (k) accounts that you have been contributing to, retirement savings accounts, the value of your home, and the value of any other property that you may own.
Next, you will want to take a very close look at what type of coverage you have on your home, property, rental properties, etc.
It’s also very important to make sure that your current liability policies cover ALL of your assets. If your protection does not go above and beyond your assets you should strongly consider a personal umbrella policy.
Obviously you will need to analyze the umbrella insurance costs and determine how much coverage your business or personal property needs that will vary from policy to policy and the coverage goes above and beyond a regular policy.
For example, a one million dollar policy can be purchased for about $300 however there are a variety of factors that affect premiums.
You might be surprised to learn that your driving record can affect the cost of your premium! In some cases, your driving record has more of an impact on the cost of the premium than your record as a homeowner.
Umbrella Insurance Companies
Umbrella insurance companies cover many nightmare situations that are too difficult for one person to overcome. Some situations are too costly for your standard insurance policy.
Many insurance companies now offer umbrella policies as it is becoming more and more common. One such is the major insurance company Geico.
Umbrella policies from Geico cover the particular loss and the remaining amount exceeding the limit of the standard policy. Some situations can lead to disastrous and devastating consequences, and insurance companies like Geico are there to protect your assets and well being in the worst-case scenario.
Geico offers this service to cover from 2 million to 10 million in excess of what your regular policy limit is. Geico not only offers auto and home policies, not to mention great commercials, but they also offer a very competitive umbrella policy.
Umbrella policies are not just for the rich and famous anymore. Anyone can be sued for much more than their policy will pay. Things such as slander and libel and now being addressed in the courtroom, and people are using the court system in astronomical numbers of lawsuits.
Geico has rapidly become a trusted name in the insurance industry with a wide variety of services, types of coverage, and policies to suit your needs.
Mercury Insurance Group offers Umbrella insurance coverage. The company is a safe play for your insurance needs. Many accidental events can have disastrous consequences that may be too much to handle and put a lot of unnecessary strain on an already tough world.
Accidents such as serious auto crashes, dog bites, and other situations may come with heavy amounts of liability. Mercury Insurance offers excellent customer service and a reasonable number of options for insurance needs.
Many different types of claims are now covered by umbrella policies, and these types of policies are becoming standard for today’s stressful world. Prepare for the unexpected with an umbrella policy from Mercury Group.
Allstate, a leader in the insurance business, also offers umbrella policies. Personal Umbrella policies from Allstate offer many unique perks and services.
For example, they will retain and pay for your attorney should you be sued over an accident covered by your umbrella plan. They also protect you in whatever location you are at, even if you are out of the country.
In this day in age with lawsuits becoming more and more common Allstate offers a simple way to protect against the unexpected. Many people are dangerously uninsured and the number of insurance companies offering an increased number of services is increasing.
Allstate is a good choice for your umbrella policy, and its service is nearly unparallel. If you are already an Allstate customer you may be eligible for big discounts saving you money while protecting you at the same time.
Allstate makes it easy for you to prepare for life’s turmoils. Shouldn’t you know that your family and assets will be protected when the worst shows up? Allstate offers affordable umbrella policies to cover a wide variety of bad situations. The protection and peace of mind that Allstate offers are excellent.