An umbrella insurance policy provides extra liability protection when the liability limits on certain underlying policies, such as home or auto insurance, are not enough for a covered claim. It may help protect your assets if you are legally responsible for a serious accident, injury, or property damage.
For many families, their home and auto insurance provide an important amount of liability protection. However, serious accidents can sometimes result in claims or lawsuits that exceed those limits. That is where an umbrella policy may provide an additional layer of protection.
How Does Umbrella Insurance Work?
Think of umbrella insurance as an additional layer that sits above certain underlying insurance policies.
For example, imagine you are involved in a serious auto accident and are found legally responsible for injuries to another person. Your auto insurance may respond first, subject to the terms, conditions, exclusions, and limits of your policy.
If an eligible covered liability claim exceeds the applicable underlying policy limit, an umbrella policy may provide additional liability protection, up to its own limits and subject to its terms.
Umbrella insurance is generally designed for major liability situations rather than everyday repairs or maintenance.
Bodily Injury Liability
One important area where an umbrella policy may provide additional protection is bodily injury liability.
Serious injuries can happen in many ways. You might be involved in an auto accident, or someone could be injured at your home.
If you are found legally responsible, a liability claim could involve medical expenses, lost income, and other damages.
Depending on the circumstances and policy terms, umbrella insurance may provide additional liability protection after the applicable underlying insurance limits have been reached.
Property Damage Liability
Umbrella insurance may also provide additional protection when you are legally responsible for damaging someone else’s property.
A serious automobile accident, for example, could result in extensive damage to another person’s vehicle or other property.
If an eligible claim exceeds the liability limits of your underlying policy, your umbrella coverage may provide additional protection, subject to the policy’s terms and limits.
Liability Related to Your Home
Your homeowners insurance typically includes personal liability coverage, but serious incidents can happen.
For example, a visitor could be injured on your property and make a liability claim against you. Depending on what happened and the terms of your policies, your homeowners insurance may respond first.
An umbrella policy may provide additional liability protection when an eligible covered claim exceeds the underlying policy’s applicable liability limit.
Lawsuits and Legal Defense
Liability claims can sometimes lead to lawsuits.
Depending on the policy and circumstances, an umbrella policy may help with certain covered legal defense costs associated with a liability claim.
However, policies differ. It is important to review the actual policy to understand how defense costs are handled and what exclusions or limitations apply.
Why Consider an Umbrella Policy?
You do not have to be extremely wealthy to face a large liability claim.
If you own a home, drive a vehicle, have savings or other assets, or simply want additional liability protection, it may be worth discussing umbrella insurance with an insurance professional.
The purpose of an umbrella policy is to provide another layer of liability protection for eligible situations.
It can be particularly important when a serious accident creates damages that exceed the liability protection available through an underlying policy.