What is umbrella coverage?

A personal umbrella policy provides two types of coverage: liability and defense costs. Once your primary policy limits have been exhausted the umbrella policy steps in. It covers a variety of situations if you’re held responsible for bodily injury, property damage, or personal injury. This means that if you’re found at fault or negligent for someone else’s injury or damage your umbrella coverage can help pay for these liability-related costs.

An umbrella policy does NOT cover physical property damage.   This means that damage to your own home or vehicle would NOT be covered by your umbrella insurance.   For example, If someone steals everything in your house or a hailstorm totals your car, your umbrella policy would NOT cover this property loss. Those situations could be covered in your homeowners or auto coverage.

Another benefit to having an umbrella policy is that it can provide extra liability coverage for auto, homeowners, boat, rv, atv and renters insurance. Typically, one umbrella policy can be applied to all underlying policies.  

When you think of umbrella insurance, think of a shield. It can help protect you from tapping into your savings or assets in the case that someone is coming after you for a claim or lawsuit.

Here are some examples of when and where an umbrella policy would step in.

1. Defense costs

If someone sues you, you typically have to pay lawyer fees and processing expenses. These costs can quickly add up, even totaling hundreds of thousands of dollars for a single trial.  Umbrella coverage can step in to pay these fees as you defend yourself in court.  If you are found at fault, the remainder of umbrella coverage not used for defense costs may then help pay for the associated liability expense you owe.

2. Teen drivers

If you have a teen driver on your auto policy, you’ll likely want additional umbrella coverage. You are required to hold auto liability insurance by law, but it may not always be enough in the case of a serious accident where you (or your teen driver) are found at fault.

Unfortunately, the crash risk is 3x higher for 16-19 year olds, and teens account for about 8-10% of fatal crashes every year. This creates high risk—and high liability. Adding umbrella coverage boosts your auto liability limit to protect against these increased risks.

3. Intoxicated party attendee

You host a party at your house. One of your guests drinks too much. He decides to drive home intoxicated. He causes an accident on his way home from your party.

Depending on the state you live in, you could be partially liable for his expenses. A lawyer could claim that you over-served him alcohol, didn’t offer him to stay the night, or didn’t take his keys so he couldn’t drive.  Umbrella coverage can help protect against this when homeowners’ likely wouldn’t.

One of the most surprising and expensive liability claims people find themselves in is indirect liability.

4. Dog bites

You take your dog out for a walk, and another dog spooks him. He and the dog get into a fight, and your dog bites that dog. He also bites the other dog’s owner, who is trying to pull the dogs apart.

This would cause bodily injury both to the owner and the dog. If your dog bit first, you could be on the line for medical expenses, lost wages, and even pain and suffering. These may not be covered by homeowners insurance, so umbrella coverage could step in to pay for the costs.

5. Homeowners liability

Umbrella coverage can raise your limit for the liability on your home and property as well. You have a birthday party for your son and his friend falls off the trampoline. You lend your lake house to a friend for the weekend and they get injured. A tree in your yard falls over and crushes your neighbor’s car. You’re liable for all of these sorts of incidents.

These are typically covered under your homeowners liability insurance. However, if the cost is greater than your homeowners insurance limit, umbrella insurance can offer additional coverage.

6. False arrest and slander

Umbrella insurance is there to help you defend yourself in the case of false arrest, imprisonment, defamation, or eviction/malicious prosecution. It can also help pay for you to regain your reputation and fight back in certain cases as well.

Umbrella insurance is typically the only insurance that will cover these kinds of situations. 

7. Pain and suffering

If you are found at-fault for some sort of incident, you can also be sued for “pain and suffering.” This is an additional cost outside of the person’s bills and expenses that relates to the psychological stress that resulted as a cause of the incident.

Pain and suffering is one of the costliest liability expenses. It can be hundreds of thousands if not millions of dollars in some cases. Umbrella insurance can help cover these costs, especially since the minimum umbrella limit is $1 million.

8. Volunteering

If you’re active in your community, you want extra liability coverage. Someone that you serve through a charitable or religious organization can come after you for negligence or inappropriate behavior. Although some charitable organizations will help pay for this, the individual can still come after you directly.

Note: Make sure all organizations you work with have some form of insurance. 

Conclusion

Umbrella insurance can help protect you and your assets from unexpected liability expenses including bodily injury, personal injury, loss of wages, pain and suffering, and defense costs.  Its an inexpensive way to help protect yourself against significant claims that could destroy your finances and your lifestyle.

For more home, auto and umbrella insurance solutions, contact RISE Insurance today at (423) 541-1111.