Here's the simplest answer you'll ever get- personal umbrella insurance is an insurance policy that provides additional liability coverage.
It usually doesn't exist by itself, however; it's normally associated with your other insurance policies, such as your home/renters and auto insurance.
Your home/renters insurance has a liability limit associated with it, let's say $300,000. Your auto policy does too-let's stick with $300,000 as well to keep it simple.
The personal umbrella policy sits above the auto and home liability limits and provides an additional layer of liability, usually in increments of $1 million.
So using the limits from above, technically you could have $1.3 million at your disposal for either an auto or home insurance claim.
When we discuss the personal umbrella policy with clients, the question we get most often is "Don't I have enough liability insurance already?" Which we usually answer with "How big is the claim going to be?"
There's the kicker- you don't ever know how big the claim is going to be. And it's usually not even the claim that bankrupts most people, it's the cost of legal representation (and when you pay an insurance premium, you're also pre-paying your legal costs- did you realize that?).
Here's an examples of how the personal umbrella policy works
Let's stick with the $300,000 used previously. Say that you cause an accident in which a driver or passenger in the other car is ultimately awarded $500,000. Your auto policy will pay the first $300,000, and your umbrella will kick in the remainder. Well, almost the remainder. Like auto policies, umbrellas have deductibles (called retained limit). Usually anywhere from $250 to $2,500. But a deductible of even $2,500 is a small price to pay if you’re hit with a $200,000 judgment.
Because umbrellas are over the top of the auto, homeowners or renters liability limits, most insurers offering umbrella policies require you to have your auto and homeowners with these companies as well. In addition, most insurers offering umbrella coverage require you to have liability limits of a certain amount on your auto and homeowners policies. Typically, this minimum is $100,000 for homeowners and $300,000 per accident for auto.
Yes, you could choose to increase your auto and homeowners liability limits to, say, $1 million for each policy. But not every auto and homeowners insurer offers such high limits.
And, do you know what? Your personal umbrella policy is usually a cheaper option than increasing the limits on your auto and homeowners insurance.
Claims time is the NOT the time to find out you have a below average policy and agent. Give us a call at (937) 592-4871 for your customized umbrella solution or fill out our contact form.
You can also read additional helpful articles about umbrella insurance by clicking the titles below:
What is NOT covered under a personal umbrella insurance policy?
Why You Need an Umbrella Policy- 5 Important Reasons
Does Personal Umbrella Insurance Provide Board of Director coverage?
Does umbrella insurance cover medical malpractice?