Umbrella Insurance FAQs
It can be easy to overlook the value of having a personal umbrella insurance policy, especially if you already have high-quality insurance solutions to protect important assets like your home and car. However, personal insurance policies, such as homeowners and auto, can fall short of the financial protection you or a family member might require if found at fault for an accident. Having an umbrella insurance policy may help fill in the coverage gap.
This probably raises many questions in your mind about umbrella insurance, including what it covers and what it costs. So, the Bearingstar team is here to provide you with some answers that should help you better understand this policy and why it might be a good time to discuss this insurance option with your local agent.
What is Umbrella Insurance?
An umbrella insurance policy is an extra layer of liability coverage that may provide added financial protection if you exceed the personal liability limits of an underlying personal insurance policy, such as standard home or auto insurance, because of a catastrophic event.
How Does Umbrella Insurance Work?
If you, a member of your family, or possibly even a pet is found at fault for an accident that causes injuries to another person or results in damages to other people’s property, you could be held responsible for paying hundreds of thousands of dollars in medical bills, repairs, legal fees, and more. In this scenario, the underlying policy, whether it’s home, car, or boat insurance, is typically triggered first to help you with claims-related financial obligations.
But these policies come with limits of liability that can be quickly used up in a legal battle. So, how will you pay for the remainder of what you owe? Without an umbrella insurance policy, your savings, retirement accounts, future paychecks, vehicles, watercraft, home, investment properties, and any other valuable assets could be at risk.
With an umbrella policy, once the limit of liability of the underlying policy is surpassed, your umbrella insurance typically kicks in to cover the remaining expenses you’re liable for, up to the limits you’ve chosen for this policy.
What Does Umbrella Insurance Cover?
Umbrella insurance usually covers many of the same things that the personal liability protection in your home or car insurance policy covers, including:
- The cost of medical bills for people injured in an at-fault car crash, an accident on your property, or by your pet.
- The cost of fixing damages you caused to another person’s property, including vehicles or buildings you may have hit in a car crash.
- The cost to defend yourself in a lawsuit related to these types of situations, and any associated judgments or settlements.
In addition, umbrella insurance may provide coverage for situations that are typically not covered by the personal liability protection in your home or car insurance, including personal injury claims such as defamation, libel, slander, false arrest, malicious prosecution, wrongful eviction or entry, and invasion of privacy. Finally, umbrella insurance may cover at-fault accidents involving rented vehicles that happen outside of the United States.
Not all umbrella policies cover all these situations, so it’s important to speak with your insurance agent to confirm what coverage your specific umbrella policy includes.
What Isn’t Covered By an Umbrella Policy?
Because umbrella insurance is a form of personal liability insurance, it is unlikely to cover:
- Damage to your own property
- Damage that you or a member of your household causes on purpose
- Liability from business activities
- Liability agreed to in a signed contract
- War or armed conflict liability
How Much Umbrella Insurance Do I Need?
Personal umbrella policies typically start at $1 million to $5 million in liability coverage limits, and sometimes more coverage is possible.
It is important to know that most insurance companies typically will require you to have certain minimum liability limits on your underlying personal insurance policies to qualify for an umbrella policy. Your local agent can walk you through this and any other umbrella insurance eligibility requirements.
How Much Does Umbrella Insurance Cost?
It may surprise you to learn how inexpensive umbrella insurance is relative to the broad protection it can offer. The typical cost of a $1 million policy, with coverage for one car and home, may fall below $20 per month. Obviously, as you increase the liability limits of your policy, this cost will go up, but not as dramatically as you might imagine. The extra protection may be well worth it depending on the value of your assets today and your future earning potential.
Do I Really Need Umbrella Insurance?
Because every individual’s and family’s circumstances are unique, we would love to answer this question after thoroughly getting to know you and your insurance requirements. However, you can ask yourself the following questions to determine whether you may be more at risk for a lawsuit:
- Do you have kids or a teenage driver in the household?
- Do you have a pool, pond, swing set, or trampoline on your property?
- Do you enjoy hosting parties at your home?
- Do you serve on the boards of any nonprofit organizations?
- Do you employ household staff?
- Do you coach your child’s baseball, soccer, or football teams?
- Do you manage a trust for your family?
- Do you have animals, including dogs, horses, backyard chickens, or even a colony of honeybees?
- Do you have a motorcycle or ATV?
- Do you own in-state or out-of-state rental properties?
If you answered yes to any of these questions, you should consider getting an umbrella insurance policy. But even if you didn’t, this type of protection may still be a very smart investment.
We know it is hard to imagine that you or someone in your household would ever be the focus of a personal liability lawsuit. However, the situations that typically lead to these types of legal conflicts, like car accidents and slip and falls, are extremely common and could put the things that you’ve worked so hard for, like your home, savings, and retirement, at risk. The reality is that for most people, especially in today’s litigious environment, umbrella insurance is likely well worth the minimal investment to secure the considerable protection it can provide.
How Can Bearingstar Serve You?
We know it can be overwhelming to try to figure out if insurance products, like an umbrella policy, will be the best way to protect what’s important to you. The Bearingstar team is here if you would like to tap into our expertise and get our advice.
We are happy to review your current personal insurance policies and the liability protection you already have included in them. If we identify any gaps in coverage that we think might be leaving you financially exposed, we can discuss options for enhancing your liability protection and giving you more peace of mind.
If you’d like to talk more about umbrella insurance or have any other insurance questions, please contact a member of our Massachusetts team by calling 877-801-7424 or a Connecticut Bearingstar professional by calling 888-519-9996. We look forward to hearing from you and helping you select the appropriate insurance solutions for your life.