Understanding Umbrella Liability Insurance

Umbrella liability insurance is a type of insurance policy that offers additional protection beyond what is covered in your standard liability insurance policies. It is designed to protect you and your assets in case of a lawsuit, especially when the costs related to the lawsuit exceed the limits of your standard liability insurance policies. In this article, we will take a closer look at umbrella liability insurance, how it works, who needs it, and what it covers.

What is Umbrella Liability Insurance?

Umbrella liability insurance is a type of liability insurance that provides additional protection to individuals and businesses beyond the coverage provided by their standard liability insurance policies. It is often referred to as excess liability insurance because it provides excess coverage beyond the limits of the underlying liability policies.

Umbrella liability insurance can provide coverage for a variety of claims, including bodily injury, property damage, and personal injury claims. It can also provide coverage for claims that are not covered by your underlying liability policies, such as defamation, slander, and libel.

How does Umbrella Liability Insurance Work?

Umbrella liability insurance works by providing additional coverage beyond the limits of your underlying liability policies. For example, if you have a standard liability insurance policy with a limit of $1 million and you are sued for $2 million, your umbrella liability insurance policy would cover the additional $1 million.

Umbrella liability insurance policies typically have a much higher coverage limit than standard liability insurance policies. Most policies provide coverage in increments of $1 million, with coverage limits of up to $10 million or more.

The cost of umbrella liability insurance depends on several factors, including your level of risk, the amount of coverage you need, and your insurance carrier. Generally, the cost of umbrella liability insurance is relatively low compared to the amount of coverage it provides.

Who Needs Umbrella Liability Insurance?

Umbrella liability insurance is recommended for anyone who has assets that could be at risk in a lawsuit. This includes individuals with high net worth, business owners, and landlords. However, anyone can benefit from umbrella liability insurance, as lawsuits can happen to anyone, regardless of their income or assets.

If you have assets that are worth more than the liability coverage provided by your standard insurance policies, you should consider purchasing umbrella liability insurance. Additionally, if you engage in activities that pose a higher risk of liability, such as hosting large events or driving expensive cars, you may also benefit from umbrella liability insurance.

What Does Umbrella Liability Insurance Cover?

Umbrella liability insurance provides additional coverage for a variety of claims, including bodily injury, property damage, and personal injury claims. It can also provide coverage for claims that are not covered by your underlying liability policies, such as defamation, slander, and libel.

Some examples of claims covered by umbrella liability insurance include:

What is Not Covered by Umbrella Liability Insurance?

Umbrella liability insurance does not cover everything. There are some types of claims that are typically excluded from coverage, including:

• Claims related to intentional acts, such as assault and battery
• Claims related to business activities, such as professional liability claims
• Claims related to employment practices, such as discrimination and harassment claims
• Claims related to damage to your own property

It is important to review your umbrella liability insurance policy carefully to understand what is and is not covered.

FAQs

What is the difference between umbrella liability insurance and excess liability insurance?

Umbrella liability insurance and excess liability insurance are often used interchangeably. However, there is a subtle difference between the two. Excess liability insurance provides additional coverage beyond the limits of your standard liability policies, while umbrella liability insurance provides both excess coverage and coverage for some claims that are not covered by your underlying policies.

Do I need umbrella liability insurance if I have a high limit on my standard liability insurance policy?

While having a high limit on your standard liability insurance policy is a good start, it may not be enough to cover all of your potential liability. If you have assets that are worth more than the liability coverage provided by your standard policies or engage in activities that pose a higher risk of liability, you should consider purchasing umbrella liability insurance.

How much does umbrella liability insurance cost?

The cost of umbrella liability insurance depends on several factors, including your level of risk, the amount of coverage you need, and your insurance carrier. Generally, the cost of umbrella liability insurance is relatively low compared to the amount of coverage it provides.

Can I purchase umbrella liability insurance without having a standard liability insurance policy?

No, you typically need to have a standard liability insurance policy in place before you can purchase umbrella liability insurance. Umbrella liability insurance is designed to provide additional coverage beyond the limits of your underlying liability policies.

Can I purchase umbrella liability insurance from any insurance company?

Not all insurance companies offer umbrella liability insurance. You should check with your insurance carrier to see if they offer umbrella liability insurance or shop around for a carrier that does.

Conclusion

Umbrella liability insurance provides additional protection beyond what is covered in your standard liability insurance policies. It is designed to protect you and your assets in case of a lawsuit, especially when the costs related to the lawsuit exceed the limits of your standard liability insurance policies. If you have assets that could be at risk in a lawsuit or engage in activities that pose a higher risk of liability, you should consider purchasing umbrella liability insurance to protect yourself and your assets.