Umbrella Insurance

Umbrella insurance goes beyond your normal limits of liability to cover injury to others, legal fees and litigation, excessive property damage, and more. Relatively cheap, it can give you protection from a sudden and serious situation.

What is umbrella insurance?
You may have heard the term before, but you might be asking yourself "What is umbrella insurance?" An umbrella policy is extra protection that goes above and beyond your normal limits of coverage when it comes to liability. Umbrella policies can offer additional coverage for things like:

• Injuries to others
• Legal fees and litigation
• Excessive property damage
• Other personal liability situations

Adding an umbrella policy to your insurance portfolio is a relatively cheap way to give your family incredible protection in the event of a sudden and serious situation.

How does an umbrella policy work?
Just like an actual umbrella that provides protection and coverage against rainy days, an umbrella policy is designed to provide additional coverage for large liability claims that your underlying insurance policies (home, auto, boat, motorcycle, etc) can't cover by themselves. It sits over top of all of the things you insure as an added layer of protection, like an umbrella.

Example: If a family friend comes to your home and is injured while at your home, they (or their medical insurance company) may deem you to be responsible for their injuries since it occurred on your property. The average homeowner only carries $300,000 in liability coverage under their home policy. If you're sued and the settlement is over $300,000, you're responsible for covering anything above that amount out of your own pocket.

Take that same example, but in this situation you added an umbrella policy to protect your family against what I call "rainy day situations." Rather than having to cover any excess claim payout out of your own pocket, you're able to use your umbrella policy to cover any losses above and beyond your normal homeowner's liability limit. Even an entry level umbrella will provide up to $1 million in coverage! Because you had an umbrella policy in place, you and your family were fully protected against your rainy day situation.

Premises Only Umbrellas
Premises Only Umbrellas give additional liability protection for just your home or rental property, but does not extend beyond to your auto or any other assets like a standard umbrella policy does! A standard Umbrella policy can provide additional protection to other personal insurance lines that you have such as boats, motorcycles, automobiles, etc. For an umbrella policy to cover those lines you must carry a minimum limit of liability coverage for each of those underlying policies.

Example: In order for your umbrella to cover any liability claims involving your auto insurance, you typically have to carry at least $250,000 in liability coverage to cover any damage you cause to someone else. Consider this your "skin in the game" to qualify for the additional coverage. Insurance companies want to make sure their clients have a solid foundation of coverage to use in the event of a claim so that an umbrella only has to be used for especially serious claims. For questions on if your assets can be covered by an umbrella policy, talk to your insurance agent to discuss the minimum requirements to qualify for an umbrella policy.

What does an umbrella policy cover?
An umbrella policy is designed to cover you in the event that you're liable for damages to others. If your normal liability coverage isn't enough to cover the entire claim, an umbrella policy will kick in to cover the additional expenses you'd otherwise be responsible for. There are different types of liability claims that are covered under an umbrella policy, here are a few:

• Property Damage Liability - Covers the cost to repair the damage or loss of another's physical property. Most often this refers to damage you caused to another's vehicle or other property in an at-fault accident.
• Bodily Injury Liability - Similar to property damage liability, except this covers the costs to repair any damage you caused to another person's body. This can involve medical bills, the cost of physical therapy after an accident, pain and suffering lawsuits, and other similar costs.
• Rental and Investment Properties - Like liability coverage under your homeowner's policy, an umbrella policy can also cover any liability claims involving any rental properties you own. For clients that own rental properties, each unit is an extension of liability. An umbrella policy is a wise investment especially for those who have these additional extensions of liability. Be sure to list all of your additional properties on the umbrella and that your investment policies carry the minimum underlying liability coverage so there is no gap from that policy to the umbrella.
• Cost of Litigation and Other Legal Fees - In the event that you are held liable for another person's damages. Having an attorney represent you in court can cost a pretty penny, especially if they have a specialized practice. An umbrella policy not only adds extra coverage in the event of a large lawsuit payout, but also for the cost of going to court itself.
• Your umbrella can also cover you for other types of liability if you're sued for:
  • Slander: defamation through a spoken word
  • Libel: defamation through written word
  • False arrest, detention, or imprisonment

What does an umbrella policy not cover?

• An umbrella policy is a wonderful coverage to have, but it does not provide coverage for:
• The cost to repair or rebuild your home
• The cost to repair or replace your personal belongings
• Medical coverage for your own family (You're covered under your health insurance, it's just for third parties)
• Any damages that result from criminal or intentional acts to others

Who needs an umbrella policy?
Nobody ever plans to cause a serious accident or be sued, but there are times where life can come at you a million miles an hour. An umbrella policy is an effective way to protect your household in the event of "rainy day situations."

It also doesn't matter if you're the client with 9 rental properties, 4 boats, 3 jet skis, and a number of other extensions of liability or if you're a younger client, usually fresh out of college, who doesn't have a bunch of "stuff" yet, you can still benefit from having an umbrella policy. Clients with many extensions of liability should carry umbrella coverage to make sure that their assets are fully protected. Young clients may not have a lot of assets yet, but they want to have them someday! For those clients, an umbrella policy protects their ability to build future wealth so that in the event of a large liability claim, they're not held responsible for paying for damages to another party for the next 20 years out of their own pocket.

Are umbrella policies expensive?

Most umbrella policies give clients an additional $1 million in liability coverage and can go as high as $10 million in coverage. $1 million in coverage sounds like it would cost an arm and a leg, but that's usually not the case! The average umbrella policy costs about $150 to $300 per year depending on the amount of risk you carry and other underwriting factors. For as little as $20 a month, you can purchase an umbrella policy that lets you sleep well at night knowing that your family has extra protection. Speak with your insurance agent to discuss your options regarding an umbrella policy!

Article written by: Agent: Elliott Hickam