NYC Insurance Blog

What is Umbrella Insurance and Why You Might Need it?

If you already have homeowners, car, and health insurance to protect your assets and loved ones, you might be wondering whether you need additional coverage. As your net worth grows, consider purchasing umbrella insurance on top of other policies. Typically, your lifestyle and hobbies can expose you to greater liability risks. Even if you are insured, all policies have limits, and the only way to protect yourself, your assets, and your loved ones is by adding an umbrella insurance policy. Umbrella insurance can provide extra liability coverage if you cause major injuries or property damage to other people. 

What is Umbrella Insurance?

Also known as excess liability insurance, an umbrella insurance policy provides financial coverage if you are found liable for a claim larger than what your homeowners’ insurance or auto insurance will cover. If an accident occurs and you lose a lawsuit over a car accident or property damage, umbrella insurance protects your assets and future assets like wages or inheritance. When you lose a lawsuit, you can pay for costs like medical expenses and lost wages for an extended period which can be very costly. Luckily, umbrella insurance picks up where homeowners’ insurance and auto insurance left off. Expect umbrella insurance to cost more because it has a high deductible. Give us a call today to see if you need Umbrella coverage!

Who Needs Umbrella Insurance?

Although you are not legally obligated to purchase umbrella insurance, it is advisable to have it. As a rule of thumb, buying umbrella insurance is a good investment if you have a lot of assets or a high possibility of being sued. With enough insurance to cover your assets in the event of a lawsuit, you will enjoy the extra peace of mind. It is prudent to buy umbrella insurance if you:

• Own a property and rent it out (landlord)
• Coach kid’s sports
• Host parties in your home
• Are a celebrity or public figure
• Have an inexperienced driver in your home
• Have several assets or significant savings
• Own property or items that can lead to injury lawsuits, for example, guns, swimming pools, trampolines, hot tubs, ATVs, jet skis, boats, dogs, etc. 
• Post reviews of products or services
• Have employed household staff
• Participate in sports where you could injure other people, for example, skiing, hunting, or surfing 
• Drive a luxury car

How Much Umbrella Insurance Do You Need?

Having enough liability insurance to cover your assets is advisable. Therefore, to decide the amount of coverage you need, add the value of your assets, savings, and investment accounts. With that in mind, check the liability insurance you already have with your existing policies and buy enough umbrella insurance to make up the difference. Sometimes, state laws may protect your IRA and your home’s equity. To avoid making mistakes, talk to your insurance agent. Remember, you must have existing auto or homeowners’ insurance policies to buy umbrella insurance coverage. The policy is only added to one of your existing policies and cannot be purchased separately. The more assets you have, the more you will pay for coverage. Typically, coverage limits start at $1 million, although they can go as high as $5 million.

What Does Umbrella Insurance Cover?

Besides the policyholder, umbrella insurance covers the policyholder’s family members or household members. Umbrella insurance covers the following:

• Bodily injury liability – covers the cost of injuring other people. Coverage may include medical expenses and liability claims when you are liable for injuring other people.
• Property damage liability – covers the cost of losing or damaging other people’s property. Property loss or damage can be associated with accidental damage and damage to vehicles or other property (resulting from a car accident where the policyholder is at fault). 
• Personal liability – covers actions a policyholder could be sued for. Some of these actions include:

1. Slander and libel
2. Malicious prosecution
3. Mental anguish
4. False detention, imprisonment, or arrest

What Umbrella Insurance Doesn’t Cover

Umbrella insurance does not cover everything. Here are some of the excluded incidents:

• Damage to your property – as a liability policy, umbrella insurance only provides coverage if you are responsible for damaging other people’s property.
• Liabilities incurred via business or professional activities – you need to purchase business liability insurance to get this coverage.
• Injuries incurred by contracted workers – if you hire contracted workers and one of them is injured on your property, umbrella insurance will not provide coverage because you have already signed a contract taking responsibility for any accidents or injuries. 
• Any liability related to war or armed conflicts – liabilities resulting from war or armed conflicts are usually very costly, and most insurance companies do not provide coverage. 
• Any liability you agreed to take responsibility for/assume – If you signed a contract and agreed to take responsibility for any liability, the umbrella won’t provide coverage. 
• The damage you or a family member/household member committed intentionally – if anyone intentionally caused an injury or property damage, you are on your own. For example, if your son intentionally pushed someone down a flight of stairs, neither homeowners’ insurance nor umbrella insurance will cover the financial costs incurred in a lawsuit. 
• Flood damage – your homeowners’ insurance does not cover flood damage, nor can umbrella insurance. Therefore, if you live in a flood-prone area, consider purchasing flood insurance to protect your home and any valuable items. 

It is important to understand that umbrella insurance can be used for personal and commercial uses. A commercial umbrella insurance policy is a great investment to provide additional liability coverage in every business. With your existing insurance coverage, there is a high possibility of facing a lawsuit that exceeds your liability limits. If this happens, you can close your business or go bankrupt. Umbrella insurance can help business owners manage unforeseen risks and have peace of mind. Carefully assess your business’s liability risk level to determine if you need to purchase an umbrella insurance policy. We can get you a fast Quote Today! Give our office a call!

Finally, there is a difference between personal and commercial umbrella policies. One of the key differences is the limits. Commercial umbrella policies have higher limits than personal umbrella policies. Secondly, personal umbrella insurance provides additional liability protection to the existing coverage, for instance, auto or homeowners insurance. However, commercial umbrella insurance provides additional liability protection to commercial insurance policies like commercial auto insurance or general liability insurance. Speak to one of our skilled brokers to get a free quote today on Umbrella Coverage.

---