The Umbrella Policy

Date Posted: 6/13/2013
Author: Roberta Turner
The Umbrella Policy; Perfect for a Rainy Day

Most drivers know the importance of having good liability coverage on their auto insurance policies. This coverage can help protect their assets and even future earnings from having to be used to pay a settlement because of the insured’s liability in an at-fault accident. An umbrella policy is not as commonly known as homeowners or auto insurance, but policyholders should consider adding it to their personal insurance package.

An umbrella or excess liability policy adds a higher level of protection above primary liability policies such as auto and homeowners. It protects the policyholder in situations when they are held responsibility for bodily injury, property damage, or personal injury to others. Umbrella coverage engages when primary liability insurance is exhausted. In some circumstances, it can also provide coverage for liability losses not covered by primary liability insurance.

The minimum coverage limit for an umbrella is $1,000,000, which usually costs a few hundred dollars per year. Limits of up to $50,000,000 are available for high net-worth individuals, subject to company approval.

Primary liability (such as that provided by an auto or homeowners insurance policy) pays claims that arise out of an insured’s negligence that causes injury or damage to another. A primary policy also pays the costs incurred to defend the insured against such a claim or lawsuit. Once the primary policy limit is exhausted, an umbrella policy pays the remaining amount of the claim, up to the umbrella policy limit. In order to purchase an umbrella policy, an insured must have primary liability coverage at certain set minimum limits, usually $300,000 per occurrence.

For more information on umbrella coverage, contact one of our Personal Lines Specialists…