Umbrella Insurance refers to liability insurance coverage that is greater and more comprehensive than your current liability insurance coverage you already have. It is designed to protect you from major lawsuits and claims that would normally cause your assets to be depleted or completely emptied as a result of litigation.
Umbrella policies provide you with additional protection when your auto, boat or homeowner insurance policy limits have been reached. It can also give coverage against claims excluded by your other policies. Examples might be claims like slander, libel, false-arrest, or even trip hazards in a rental unit you own.
Other viable coverage situations include being at fault in an automobile accident in which the bills and expenses for medical exceed your normal coverage limits. Another scenario for umbrella coverage might be if your pet Pit Bull finds his way into a neighbor’s garage and chews up a valuable piece of artwork or consumes your priceless first edition “Old Yeller” book.
To clarify, suppose you were at fault in an accident and claims filed against you totaled $700,000 of medical care. This would not be unheard of given the outrageous inflation of medical costs over the years. If you have only a basic $300,000 automobile liability policy, the umbrella liability policy could cover the difference.
It may seem obvious that in order to apply for umbrella insurance you must have a normal liability policy in place, but it is important that one knows this. It is entirely up to you to decide how much extra coverage you would like. It would serve you well to consult with an insurance professional in order to obtain a policy that properly provides the extra coverage you need.
There are different kinds of umbrella policies offered. One kind is known as a “follow form” policy that conforms specifically to the kind of coverage in the existing underlying policy. Policies with broader coverage than the underlying policy will cover the losses from the first dollar of your loss while “follow form” policies will cover only the losses that exceed your existing policies. Again, consult with a professional insurer to be clear of your options.
Umbrella coverage is perfect for those who feel that they may be at risk of losing income or assets due to a lawsuit. Many can attest that these kind of supplemental policies can be the best insurance purchase they ever made.