In today’s economy, everyone is pinching pennies. You’ve heard about umbrella coverage, but is it worth investing in?
What is Umbrella Insurance?
Umbrella insurance is extra liability insurance. It is designed to help protect you from major claims and lawsuits and as a result, it helps protect your assets and your future. It does this in two ways:
- Provides additional liability coverage above the limits of your homeowners, auto, and boat insurance policies. This protection is designed to kick in when the liability on these other policies has been exhausted.
- Provides coverage for claims that may be excluded by other liability policies including false arrest, libel, slander, and liability coverage on rental units you own.
You’re probably thinking, “I have auto and homeowners insurance that covers some of these situations.”
True! But, umbrella coverage insures you above and beyond the limits of those policies and covers some situations that aren’t covered by the other types of policies.
So what exactly does umbrella insurance cover?
- Damage to property
- Certain lawsuits
- Personal liability situations
Bodily Injury Liability – covers the cost of damages to another person’s body. Examples include the cost of medical bills and/or liability claims as a result of:
- Injuries to other parties due to a serious auto accident where you are at fault
- Harm caused to others as a result of your dog (yeah, you probably should have taken him to obedience school!)
- Injuries sustained by a guest in your home due to a fall
- Injuries sustained by a neighbor’s child who falls while playing in your yard
Property Damage Liability – covers the cost of damage or loss to another person’s tangible property. Examples include the cost associated with:
- Damage to vehicles and other property as a result of an auto accident where you are at fault
- Damage claims incurred when your pet rips a friend’s priceless oriental rug to shreds
- Accidental damage to school property caused by your child (hey, you can’t disown them!)
Owners of Rental Units – helps protect against liability that you may face as a landlord. Examples include the cost of liability claims as a result of:
- Someone tripping over a crack in the sidewalk of your rental property and suing you for damages
- Your tenant’s dog biting someone and you being held responsible for the injuries
Coverage is also provided should you be sued for:
- Slander – injurious spoken statement
- Libel – injurious written statement
- False arrest, detention, or imprisonment
- Malicious prosecution
- Shock/mental anguish
- Other personal liability situations
Unfortunately, we live in a world of lawsuits. Large damages can be awarded, be extremely expensive and have a long-term financial impact.
Still not sure about investing in umbrella coverage? Here are a couple of scenarios that can happen to anyone:
Think Beyond your Homeowner’s Insurance
Lawsuits can even come from unlikely sources, such as our furry friends. Take Herschel for instance. Herschel is a much-loved, rather timid Goldendoodle who enjoys taking naps on the driveway while his owner mows the lawn. Herschel watched from eight feet away as his neighbor, a 39-year-old man, showed off his rollerblading skills to his kids. The man wiped out on the sidewalk in front of Herschel’s house and broke his leg. He required surgery, costing around $35,000 in medical costs and $18,000 in lost wages.
Fair or not, the man brought a lawsuit against Herschel’s owner, suing for $220,000 in damages. He alleged that Herschel had caused the accident by getting in his way, despite multiple witnesses to the contrary.
But Herschel’s owner was lucky–a jury vindicated Herschel. However, lawsuits such as these can easily exceed the limits on a homeowner’s policy, leaving the insured responsible for the remainder. An umbrella policy would prevent that, giving you an extra $1 million to $5 million in coverage.
Our furry friends can put your assets at risk in other ways as well. According to the Center for Disease Control and Prevention, 4.7 million people are bitten by dogs each year, with half of those occurring on the owner’s property. Dog bites, according to the Insurance Information Institute, account for about a third of all homeowner’s insurance claims, which only cover limited damages.
Think Beyond your Auto Insurance
Let’s say you cause an auto accident and the cost of the injuries you cause to others is $500,000. Let’s further say that the Bodily Injury limit on your auto insurance is $300,000. Your auto policy will cover $300,000 of the injuries. But who will cover the remaining $200,000? Your umbrella policy will. It will cover the amount above the limit set in your auto policy, up to the limit you choose for your umbrella policy.