What is an Umbrella policy?
An umbrella policy is a type of extra insurance that goes beyond what is covered in your home, auto and boat policies. It kicks in when your normal liability coverage isn’t enough to pay for a claim you’ve been held responsible for, and according to the Insurance Information Institute, it will also cover you for things such as libel and slander.
Who needs umbrella insurance?
It makes sense to think that only a rich person with a lot of assets to protect would need an umbrella policy, but the truth is this sort of extra protection can be important for the average person, as well. All sorts of things can increase your risk of being sued, including owning a dog, being the parent of teen drivers, having a swimming pool in your backyard and more.
What does it cover?
Umbrella insurance covers things like bodily injury, property damage and libel and slander. It will also cover things that may be excluded in your homeowners policy, such as certain dog breeds, trampolines, etc., as long as they aren’t specifically excluded in your umbrella policy.
This means that you’ll be protected if you’re at fault in a car accident; your dog bites your neighbor; somebody falls and gets hurt on your front steps; you accidentally smash your friend’s priceless work of art; your child damages school property and more.
Are there any exclusions?
According to Travelers, common umbrella policy exclusions include damages you cause on purpose, liability assumed under contract, damages from your business pursuits, liability related to ownership and maintenance of aircraft or non-traditional watercraft such as jet skis and liability arising out of war.
Things to consider
When deciding whether to purchase an umbrella policy, and if so, for what amount of coverage, there are several factors to consider. According to Travelers, you should take into account the value of your current and future assets, any activities you participate in that could put you at an increased risk of being sued, if you have teenagers (and especially teenagers who drive) and more. Your insurance agent will be able to help you determine exactly how much coverage you need.
How much does an umbrella policy cost?
According to the I.I.I., you can get a $1 million personal umbrella policy for $150 to $300 a year. The next million will cost an additional $75 per year, and $50 for every million after that.
Are there any limitations?
Most insurers will require you to have $250,000 of liability insurance on your auto policy, and $300,000 on your homeowners insurance policy before selling you a $1 million umbrella policy, according to the I.I.I.