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Personal Umbrella Insurance
A personal umbrella policy can provide additional liability limits over and beyond the limits shown on your underlying policy declarations. What this means is that your home or auto policy may provide $300,000 of liability for an accident in which you are determined to be at fault, while a personal umbrella may provide you with another $1,000,000 or more of liability limit if damages you cause exceed the limits on your “underlying” auto policy.
A personal umbrella liability policy is an affordable and important part of a comprehensive insurance portfolio. Settlements and restitution are continuously on the rise and having enough liability insurance is arguably even more important that having sufficient property insurance coverage. Since it is difficult to measure the potential severity of possible liability claims, or the amount for which people may choose to sue, the case for purchasing a personal umbrella policy is compelling. Having a liability limit that exceeds the value of your personal assets is a good starting point in determining how much liability insurance you should maintain. Liquidating assets that you and your family have worked hard to accumulate is not a viable long term strategy for paying liability claims and can have generational impacts.
Arguably, a personal liability policy can fulfill a moral and ethical obligation you may feel to a party whose injuries you are responsible for. If someone is in need of extensive medical treatment, or has had significant property damage arising from your negligent actions, it is important that they can be adequately compensated for their loss. If you are carrying sufficient limits of liability, including an umbrella liability policy, some of the emotional and financial burdens may be lifted from the injured party and yourself, alike.
Frequently Asked Questions
How do I know if I need a Personal Umbrella Liability Policy?
Individuals with high net worth, significant assets or increased personal liability exposures are all good candidates for a personal liability policy, although in the current legal climate we live in, an umbrella is a prudent choice for all types of clients.
High net worth individuals and folks with significant assets may be larger targets for lawyers and expensive lawsuits. Real estate holdings that are of significant value are easily discovered and the perception of “deep pockets” or the ability to pay large settlements or lawsuits can be a motivating factor for an injured party.
Other insureds might find their liability exposures within their household have increased with the addition of a new teen driver to their auto policy. This presents a heightened probability of loss on a statistical basis, and having adequate insurance limits, to guard against the possibility of an unfortunate catastrophic vehicle accident caused by a youthful driver, should be a priority.
How much does a Personal Umbrella Policy cost?
Personal Umbrella Liability Policies are fairly economical. Minimum annual premiums may be as low as $150 or less, depending on the underlying policies and risk exposures that are present. You may see a charge for adding additional vehicles to your underlying auto policy, or experience a small surcharge for an inexperienced driver on your policy. You may also have the umbrella rate affected by specifics pertaining to your residence premises; things like swimming pools or trampolines may be factored into the Umbrella rating. Even with increased liability exposures, Umbrella policies are often some of the cheapest insurance you will purchase.
What kind of policies will a Personal Umbrella Liability policy provide additional liability limits for?
Personal Umbrella Liability Policies provide additional limits of liability coverage over and above your underlying personal insurance policies. These policies may include homeowners or renters insurance, personal auto policies, recreational vehicle or personal watercraft insurance, antique auto policies, etc.
Do I have to buy a Personal Umbrella Policy from the same company that writes my home or auto insurance?
The short answer is no. However, your insurance company may offer an umbrella in conjunction with a homeowners or personal auto policy. They may also allow the umbrella to sit over another company’s recreation vehicle policy, for example, if they do not offer that type of insurance product. Often, it is best to obtain an umbrella liability policy from the same company who writes the underlying insurance to ensure that the exposures covered are consistent between the underlying policies and the umbrella. Still, other companies will issue umbrella policies on a monoline basis; meaning that they will write only the Umbrella policy and allow it to sit on top of other company’s homeowners policy, auto coverage, recreational vehicle liability, etc. Sometimes it becomes necessary to obtain a monoline umbrella if your underlying insurance policies are not consolidated with one company. This is on a case-by-case basis and your agent can assist you with the process.
I see a line item called Self Insured Retention on my umbrella policy, is that the same as a deductible?
No. Self insured retention is an amount you are responsible to pay toward a liability claim against your umbrella policy if the liability claim is not covered by the underlying policies but is, in fact, covered by your umbrella liability. Typically, the claim is first paid through your underlying personal insurance policies and, in the event said claim exceeds the limits on those underlying coverages, the umbrella will be available to provide you with additional liability limits without the self insured retention applying to the loss. It is not common for underlying personal liability coverage to be subject to a deductible, and the self insured retention on an umbrella policy would only apply to specific circumstances were the umbrella policy language proves to provide more expansive coverage than the underlying policy language.