Umbrella insurance is additional coverage that can offer you asset protection when limits on your policies are reached, or for situations they might exclude, such as false arrest, libel, or slander. If you are a landlord, an umbrella policy could protect you in the event one of your renters decides to sue.
You might think that you donât need umbrella insurance, but itâs important to consider changing risk situations before you decide. For example, lawsuits can be very expensive and might exceed the coverage limits set by your underlying homeowners or auto insurance policy.
How does umbrella insurance provide additional coverage?
Umbrella insurance provides additional coverage in two ways: by increasing the dollar limits above the amounts in standard insurance policies, and by extending coverage to situations that are excluded from other types of policies.
For example, say a guest is injured at your home, and between the hospital bills and physical rehabilitation, the amounts exceed the coverage limits of your homeowners insurance policy. If you have an umbrella policy, it will cover the excess liability costs and bills. If you do not have an umbrella policy, you will need to pay the excess charges out of pocket.
Umbrella insurance also offers some protections that are not part of standard policies, such as being sued for libel or slander. If you are in a position that could expose you to this type of risk, considering an umbrella policy may be a good idea.
Does umbrella insurance protect landlords?
An umbrella policy can help to protect landlords from costs associated with lawsuits relating to a rental property. Umbrella insurance should not be seen as a substitute for landlord insurance, but rather an extension of that coverage.
Umbrella coverage is also sometimes called âexcess liabilityâ insurance, and this is a good way to think of itâas a means to protect your assets if the liability limits of your underlying insurance policy are exceeded.
Umbrella insurance for rental property can also cover multiple properties, unlike the underlying insurance which is tied to the property address. Depending on the number of rental properties and the value, a landlord may need to purchase a commercial umbrella insurance policy.
Landlords are responsible for keeping properties safe for tenants. If you have multiple properties, or if your properties are in areas prone to weather events, having an umbrella policy is a good idea.
Who needs umbrella insurance?
Many people mistakenly assume that only really wealthy people need umbrella insurance. There are two things to consider if you are wondering if you need umbrella insurance: one, if your net worth exceeds your liability coverage limits; and two, what your liability risk is.
On the first point, if you have assets that exceed the limits of your liability coverage, you will want to protect them. If youâre in a serious car accident that injures others and are found to be at fault, without umbrella coverage, you may be required to pay any costs that exceed your vehicle policy limits by liquidating your savings.
The question of liability risk is a bit harder to pin downâin our litigious society, almost everyone is at risk of being sued. But, if you hold certain roles or are a higher-profile individual, you might want to consider an umbrella policy. Volunteer coaching, owning a swimming pool or trampoline, employing staff (such as a nanny), renting property, or being a local public official, all carry additional risk of being sued. These individuals may want to consider adding umbrella coverage.
Does umbrella insurance cover injuries to others?
Umbrella insurance covers legal fees if you are sued, and protects the policyholder from liability relating to bodily and non-bodily injuries and property damage.
An umbrella policy will not cover intentional injuries. If you get into a physical altercation with a neighbor about a property line causing an injury, your umbrella policy potentially will not cover the costs associated with any legal fees that might arise, or hospital bills relating to the injury.
Does umbrella insurance cover damage to someone elseâs property?
Yes, umbrella insurance will cover damage done to someone elseâs property, related to liability, if your policy limits are exceeded.
For example, if you get into a car accident for which you are found liable, and cause damage to someone elseâs property, your vehicle insurance will cover costs to repair the damage up to a limit outlined in your policy. If the accident was bad enough that the liability limits in your auto policy are exceeded, your umbrella policy would then âkick inâ to cover costs.
Please note that property damage itself is not the issueâitâs the liability of the driver. Umbrella insurance is designed to help with costs when liability limits are exceeded.
What doesnât umbrella insurance cover?
There are a number of situations not covered by umbrella insurance. One is mentioned aboveâumbrella insurance will not cover intentional injuries.
Your umbrella policy may have specific exclusions, so make sure you know and understand what is and is not covered. For instance, some insurers exclude injuries caused by certain types of recreational vehiclesâlike golf carts or 4-wheelers/ATVs. Some insurance companies exclude injuries caused by certain dog breeds.
Umbrella insurance will not cover members of your household who carry separate insurance policies through another insurer. For example, say you have an adult child who is living at home after graduating from college, and their car is covered through a different insurance company. If they get into an accident that is determined to be their fault, and the damage exceeds their policy limits, your umbrella coverage will not cover the excess.
Excess liability coverage does not apply when damage is done by you to your property, or to cover your injuries.
Essentially, the way to think about umbrella insurance is that it is extra coverage for you in the event you get sued and are determined to be at faultâand the legal costs, judgments, and fees exceed your policy limits.
What is a retained limit?
Because umbrella coverage is designed to provide liability coverage for damages that exceed your standard policies, insurers want to make certain that your âbaseâ coverage is sufficient.
A retained limit is the required amount of coverage a policyholder is required to carry on the underlying insurance policy.
Where can I get a quote for umbrella insurance?
Contacting the experts at Rate Insurance is the first step to learning more about umbrella insurance. They will talk to you about your liability exposure, and can provide quotes for umbrella insurance, finding a policy that will protect your assets.
Disclaimer:
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate Insurance does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate Insurance. Rate Insurance, its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
