Umbrella insurance is a kind of personal liability insurance that performs two primary functions. First, it covers any liabilities in excess of the limits of a primary policy, such as homeowner's insurance and automobile insurance. Second, in the event that you incur liability that is not covered by your primary policy, the umbrella insurance policy "drops down" and becomes the primary policy with respect to the excluded liability.
Primary policies can only cover so much, and even if actual damages can be reasonably anticipated, other forms of damages, such as moral or exemplary damages, have no defined limit, and can easily exceed the policy limit. This is why an umbrella insurance is practical. For a comparatively minimal cost, you can get additional coverage of up to $5 million, depending on the policy and the properties you wish to protect.
What's more is that the umbrella insurance can be used to cover liabilities that your primary policy might not have anticipated, or otherwise will not cover. For example, personal liability for defamation would ordinarily not be covered by homeowner's or automobile insurance, but may be covered by ann umbrella insurance policy. Additionally, an umbrella policy is structured to answer for legal representation fees on top of the amount in the policy. It may even answer for lost income due to attending court hearings.
Do note that umbrella insurance is a form of secondary insurance. What this means is that before you can buy an umbrella insurance policy, you'll need to have an existing homeowner's or automobile insurance. Often the insurance company will require you to have a particular coverage amount on your existing policies before they will agree to sell you an umbrella policy. Keep this in mind when you are in the market for umbrella insurance.
The basic benefit of an umbrella insurance policy is peace of mind. You won't have to worry about any gaps in your primary policies, or about excess liability that your existing policies can't cover. Nor will you need to worry about litigation expenses or forgone income.
Back to Home
Learn about Homeowners Insurance
Learn about Life Insurance
Learn about Auto Insurance