A personal insurance policy can protect you from financial loss when certain covered perils strike. However, sometimes having standard coverage isn’t enough. You may still be exposed to significant losses even while you are covered if significant claims are brought against you. This is where umbrella insurance comes in—to offer additional protection. Read on to learn more about umbrella liability insurance and why do you need it.
What Is Umbrella Insurance?
Umbrella insurance is additional liability coverage that extends beyond the limits and coverages on your existing policies. When you have a standard homeowners or auto insurance policy, you can take out umbrella coverage to extend your protection.
What Does Umbrella Insurance Cover?
Typically, umbrella insurance can cover claims not included in your existing liability policy. It can also kick in to pay for third-party damages beyond your existing policies’ limits. Possible umbrella liability coverages include:
- Injury claims
- Property damage claims
- Certain legal expenses
- Personal liability
However, umbrella coverage doesn’t cover lawsuits, personal losses, or compensatory damages like:
- Medical costs for treating your injuries
- Costs for replacing/repairing your lost, damaged, or stolen personal property
- Third-party injury or property damage liabilities arising from your own criminal or deliberate acts
- Liabilities related to contractual agreements
Common Liability Claims Covered by Umbrella Insurance
Here are 8 common umbrella insurance liability coverages:
Legal Defense Expenses
Sometimes, attorney fees, investigations, legal paperwork, and court fees can overwhelm you when a person sues you in court. Umbrella insurance can cover these defense costs, so you don’t have to pay for them out of pocket. After paying for your legal defense, the remainder of the coverage can also settle the liability expense if you’re found liable.
Teen Driver Liability
Based on accident statistics, teen drivers are at the highest risk of being involved in serious auto crashes. So when you add a 16-year-old to your auto policy, you increase your liability risk. Umbrella insurance can expand coverage beyond your existing auto liability limit. It’s also a cheaper way to address the extra risk than adding the liability on your existing auto policy.
In some states, serving alcohol to guests in a house party exposes the host to partial liability. If one of the guests becomes intoxicated and causes injury to another person due to the intoxication, the victim might blame the host. Umbrella insurance can cover this liability in states with social host liability laws.
Umbrella coverage can pay for injury claims if your dog becomes aggressive and bites another dog or person while out for a walk.
Liability claims can be brought against you when a friend’s child accidentally drowns in your home pool or is injured while playing on the trampoline. If your homeowners’ liability limit is below the claim filed against you, umbrella coverage can step in to fill the gap.
Wrongful Arrest and Defamation
Umbrella insurance can pay your legal defense expenses when you’re held liable for false arrest or defaming an individual.
Pain and Emotional Trauma
Usually, injury liability cases are associated with pain and suffering claims besides medical costs. Umbrella insurance can cover the additional liabilities in such scenarios.
Despite your acts of kindness through charity, you may sometimes end up being sued for negligence. The charitable organization you’re volunteering for may cover such a claim. If not, it’s a good idea to have umbrella coverage.
Answers to Common Umbrella Insurance Questions
Here’s a look at some common hot-button issues regarding umbrella insurance:
Does the policy cover professional liability?
No, umbrella insurance doesn’t cover bodily injury or property damage claims resulting from the execution of your professional services.
What if my auto insurance and umbrella coverage are from different insurers?
Most insurance companies will not sell you umbrella insurance unless you have an existing liability policy with them. What if an insurer offers you umbrella coverage provided you have either personal liability or an auto policy with them? If you had your auto insurance with another company in this scenario, your umbrella insurance carrier would potentially cover additional liability beyond your auto policy’s limit.
Can my defense costs exceed my umbrella coverage limits?
If your existing umbrella coverage limit is $1 million, it’s possible to incur compensatory damages higher than this limit, leaving you exposed to loss. The good news is you can extend your umbrella coverage limit to $2 million, $3 million, or even $5 million.
Are excess liability and umbrella policies similar?
The policies are similar in that they can extend liability protection beyond the limits of your existing policy, such as by $1 million. However, only umbrella coverage can include additional coverages that are not available through your existing policy.
What is the cost of umbrella insurance?
Your coverage needs and the insurance risk you pose will determine your umbrella coverage costs. The number of family members and the value of personal assets covered, including homes and cars, will also impact the price for extra liability coverage.
To protect yourself and your assets against these liability claims, consider getting umbrella insurance in Sarasota, Florida. The experts at Atlas Insurance can help you expand your coverage and seal any gaps that expose you to financial losses after incurring substantial liability claims. Contact us today to get started!