Insurance Blog
Tuesday, 10 March 2020 14:39

What is Umbrella Insurance?

What is Umbrella Insurance?

Umbrella insurance provides excess liability insurance coverage that goes beyond the limits of the your homeowners or auto insurance policies. It offers additional protection in the event that you are sued for property damage or injuries. It also protects against libel, vandalism, and slander. The following explains how umbrella insurance works.

Is umbrella insurance necessary?

It’s important to first understand what is covered by standard homeowners and auto policies as well as the potential benefits of umbrella policy. The following may help you decide if umbrella insurance is appropriate for you.

What does my standard home owners policy cover?

Most homeowners' insurance policies provide coverage for your home, its contents, and other structures like a garage or shed.

Your personal property is typically covered against fire, lightning, theft, windstorms and hail, smoke, damage by vehicles or aircraft, burst pipes, damage from falling objects, and damage caused by weight of snow and ice. Coverage is also provided for personal liability, medical expenses for others which result from injury on your premises, and damage to the property of others while on your premises. Coverages are subject to your homeowner policy limitations and exclusions.


What does my standard auto insurance cover?

Most Massachusetts personal auto policies provide you with

  • Bodily Injury Liability - Covers accidental injury or death of another person if caused by you in an automobile accident.
  • Property Damage Liability - Covers accidental damage to other people's property if caused by you an automobile related accident.
  • Defense Costs - Covers court costs, legal expenses and attorney's fees.
  • Collision - Covers you for damage to your car in an accident, regardless of who was at fault.
  • Other Than Collision - Covers your car against damage from fire, lightning, flood, theft, glass breakage, falling objects, and other specified perils.
  • Medical Payments - Covers you and your family in any car, and anyone riding in your car for medical expenses, resulting from an accident.
  • Uninsured/Underinsured Motorist - Covers injury suffered by you, your family and anyone riding in your car (unless covered by another MA Auto Policy with similar coverage) against the uninsured / underinsured or hit-and-run driver.

As with any insurance policy, the above coverages are subject to the limitations and exclusions of your auto insurance policy.


How does an umbrella policy cover me beyond my home and auto policies — how does it work?

An umbrella policy provides additional coverage that is beyond the limits of your basic home and auto policies. It can protect you from bodily injury liability claims and property damage liability claims. Umbrella policies also can help cover legal fees, false arrest, libel, and slander.

Umbrella insurance can come into play if you are found liable and need to pay damages, or if you are sued and need to pay for your legal defense — even if you are not found to be responsible. An umbrella policy only pays once your basic liability limits have been exhausted or the claim is excluded from the basic liability coverage. The claim will be made against you, the policyholder, on behalf of the wronged party. Then your insurance company may pay the settlement amount up to the limits of your coverage. If the settlement amount exceeds your coverage limits, you are responsible for paying the remaining amount out-of-pocket.


Why is umbrella insurance important?

Your car, house, investments and retirement accounts, as well as your bank accounts and future income are all considered assets. It is important to know that if you are sued for a lot of money and do not have enough liability insurance or an umbrella policy to cover those costs, all your assets are exposed. People typically choose to buy an umbrella policy because they want to prevent the possibility of financial ruin due to one misstep or unforeseen accident. Umbrella insurance can provide the protection to prevent such an outcome.


Does umbrella insurance cover property damage?

Umbrella insurance will cover property damage in most but not all circumstances. We all know accidents happen, and you never know how extensive the property damage can be until you get an estimate. If you cause an accident involving several cars, everyone may walk away unscathed, but the property damage to other cars can be enough to break the bank.


Does umbrella insurance cover dog bites?

Umbrella insurance covers dog bites under most circumstances. If your dog bites your neighbor, you are liable for that person’s bodily injury. Umbrella insurance can also cover you if your neighbor decides to seek legal recourse. Additionally, depending on the insurance company issuing your homeowner policy, an umbrella policy may be your only real protection if you own certain aggressive dog breeds.


Does umbrella insurance cover uninsured motorists?

The majority of umbrella insurance policies do not cover uninsured motorists. An umbrella policy is meant to cover any property damage or bodily injury you cause. In a scenario where an uninsured or underinsured motorist causes an accident and does not have the coverage required to pay for your property damage or injuries, you would typically need to have uninsured/underinsured motorists coverage in place to receive compensation.


Does umbrella insurance cover car rentals?

You can insure a rental car several different ways, including through your primary policy or through the rental agency itself. To fully protect yourself financially in the event that you cause an accident while driving a rental car, you may consider purchasing an umbrella liability policy. Umbrella insurance is a good policy to have if you want to make sure you have coverage in unpredictable situations, including when you rent a car.


Should landlords have umbrella insurance?

An umbrella policy can be a wise investment for landlords. If you own rental property, you are responsible for making sure your property is safe for your tenants and your guests. An umbrella policy will most likely protect you in several different scenarios, such as:

  • A third party sues you for damages your tenants cause
  • A visitor is injured in a fall due to a broken step or handrail
  • A guest is injured in your workout or pool facilities
  • You neglect to change the locks on a unit and a former resident with a key burglarizes the apartment

If you have a substantial amount of personal net worth, you may want to invest in umbrella insurance to protect yourself. Make sure you find the right coverage by consulting with a member agent in the Trusted Choice network. Independent agents can customize your coverage for your unique needs.


Is umbrella insurance expensive?

The general guideline for coverage is to purchase enough umbrella insurance in an amount equal to or more than your net worth. The cost typically starts in the range of $150 to $200 per year for $1 million of additional liability and increases with the coverage limit. However, choosing double the amount of coverage to $2 million may not double the cost of your premium.

Liability awards can be expensive. Without umbrella coverage, and relying solely on your standard home and auto insurance, you could end up paying out-of-pocket for any costs beyond your home or auto insurance limits — a lien could be placed on your home, and your wages, savings and other assets may be at risk. Therefore, the cost for an umbrella policy is far less than out-of-pocket losses that aren’t covered by your basic home and auto insurance.


Do I need umbrella insurance?

The decision to purchase umbrella coverage depends on your answers to these two questions:

  1. How much will you lose if you are sued?
  2. What are your risk factors?

You could have more to lose than you realize. If you own property or have other assets you want to preserve, or you’re putting yourself at risk in any way, umbrella insurance is the best means of protection.

To help assess your risk of being sued, download and complete the “Liability Assessment” by Chubb Insurance, one of the insurance carriers we represent.


We’ve Got You Covered

Get the help you need to decide what’s best to protect you, your family, and your assets. Give us call, or complete and submit the form below for low cost umbrella coverage recommendations.

Source: Trusted Choice

Read 2757 times Last modified on Thursday, 30 July 2020 23:04

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