Updated: Nov 8, 2018
Umbrella insurance is simultaneously an important topic to understand and a type of insurance that most people don’t even know exists. You can think of umbrella insurance as additional liability insurance. It is ultimately meant to protect you against major lawsuits and claims and to help protect both yourself and your assets.
So what is umbrella insurance? Basically, two things:
1. A means of providing additional coverage on top of the limits that homeowners, boat, and automotive insurance policies already provide. The umbrella protection is meant to begin when the liability on those policies has become exhausted.
2. A means of providing coverage for some claims that might be excluded by other liability policies, including such risks as liability for rental units, libel, false arrest, or slander.
Understanding that, however, doesn’t bring you much closer to knowing when your policy might kick in and, more importantly, what it actually provides coverage for. As previously stated, umbrella policies go above and beyond what the limits of your homeowners, automotive, and boat insurance provide already. They also cover some situations that aren’t covered by those policies.
They could kick in for damage to property, injuries, some lawsuits, or some personal liability situations, including the following:
Property Damage – Cost of loss or damage to another individual’s property, which could include vehicles damaged in accidents where you were at fault, pet damage to other’s flooring or textiles, etc.
Bodily Injury – Cost of damage to another individual’s body, such as medical bills, liability claims due to injury, lawsuits stemming from slip-and-falls in your home, etc.
Rental Units – Covers any liability you may be facing as a landlord, like issues with the property itself (such as cracks in the sidewalk that someone trips over) or tenant issues, (such as a tenant’s dog biting someone).
Coverage would also extend to some lawsuits, particularly ones involving slander, libel, shock or mental anguish, malicious prosecution, or false arrest.
The problem isn’t that umbrella policies are expensive or hard to come by. Rather, the problem is that many people don’t know that they exist, and if they do, people believe that they are already covered by the policies that they have and, thus, do not need to get any additional protection. The question is, can you afford to take that risk? At the very least, it would pay to look into umbrella insurance and what it may cost.