What Is Umbrella Insurance?
Think of umbrella insurance as a powerful financial shield, that can help protect your savings and future earnings under certain situations. Umbrella coverage offers additional financial protection over and above the personal liability limits of other currently active insurance policies you have.
Whether you’re found at-fault for a multi-vehicle crash on the interstate, or if a guest should slip and fall down the icy steps outside your home — the added coverage in an umbrella policy can kick in and help to cover any remaining costs should the liability limits on your underlying car or homeowners max out.
And umbrella coverage doesn’t stop there. Liability lawsuits can come in many forms and the hefty financial judgements that frequently accompany them can also drain your savings. Today, let’s take a closer look at umbrella insurance — to help you understand how this coverage can help protect your financial dreams and everything you’ve worked so hard for.
How Does Umbrella Insurance Work?
Here’s how an umbrella policy helps cover additional costs — after your underlying coverage limits are met:
You or a family member accidentally injure someone
Suppose your dog darts out the front door and jumps in front of a cyclist, resulting in a multi-vehicle crash with serious injuries. After your homeowners liability coverage pays out to its limit, your umbrella insurance will then kick in to help cover expensive repairs, costly medical bills and other covered expenses.
As a board member, you’re found liable for a decision you made
Although the terms of your service can impact liability, volunteer board members may be able to use their personal umbrella coverage to help protect their savings, if found liable in a court of law. Be sure to review your liability policy with your agent to understand how and when your coverage can help.
Your spouse hits the gas instead of the brakes
While your partner is pulling into a parking spot, their foot slips off the brakes and onto the gas pedal. The car then plunges into a storefront causing serious property damage and injuring three people. After your auto coverage limit is met, the umbrella policy can then help to pay for the rest of the damages and resulting hospital bills — up to the umbrella policy’s limit.
Minors access your liquor cabinet
Suppose you’re away for the weekend and you forget to lock your liquor cabinet on the way out. An underage guest then has several drinks and on their drive home, crashes their vehicle later that evening. This results in a totaled car and extensive injuries to the driver and others involved in the accident.
You injure someone in an ATV collision
While out on the ATV trail with friends, you misjudge a curve and collide with another ATV. You’re found liable and now need to pay out thousands more than your ATV’s liability limit provides.
You strike another boat at high speed
Accidents on the water can happen quickly and costs for damages can add up when others require immediate medical attention. After the liability limits on your watercraft coverage are met, your umbrella insurance can help to pay for repairs and long-term health expenses to others.
Who Needs Umbrella Insurance?
Everyone can benefit from the protection of an umbrella policy. You’ll find the extra protection that umbrella insurance coverage offers is key, if you:
- Own or rent a home or condo
- Have a dog
- Have significant savings or financial assets
- Have kids living at home
- Are a coach on your kids’ sports team
- Travel abroad
- Own recreational vehicles like an RV, boat, wave runner or ATV
- Own rental properties
- Have a pool or trampoline
- Volunteer on a board
Do You Need A Base Policy to Buy Umbrella Insurance?
Yes, you will. Because umbrella insurance is supplemental in its design, you’ll need to have primary liability coverage of some sort already in place in order to qualify.
According to the Insurance Information Institute, most insurers require a base auto policy with around $300,000 in auto liability protection and $250,000 in place on a homeowners policy. Once that criteria is met, most insurance companies will offer additional umbrella policies that typically extend liability coverage to $1,000,000 and more.
Why Do You Need Umbrella Insurance?
This coverage can really help you out of an otherwise tough financial situation. It can protect you from wage garnishment where your future earnings could be docked. And if liability judgements levied against you exceed the limits of your homeowners, auto or other policies you have, you’ll be glad you’ve got this important coverage in place.
How Is Defamation, Slander and Libel Covered?
Coverage typically extends to others that are not named on your policy. That means that you can’t sue yourself for defamation — or other persons listed in your policy — for that matter. But if you made a slanderous comment on social media against someone, and a legal judgement finds you guilty, the settlement from that lawsuit could otherwise wipe out your savings and force you to relinquish other financial assets.
With umbrella coverage in place, your retirement funds, financial holdings and the hard-earned equity in your home can be better protected from legal liable settlements.
What’s Not Covered with Umbrella Insurance?
Liability coverage helps you cover the financial responsibilities related to issues that others experience when you’re found legally at-fault. But umbrella insurance won’t cover damage you do to your own property or liabilities related to your profession or business.
Most umbrella policies typically extend coverage on exposures — or covered events — that are identified in a given underlying policy. You can also purchase an endorsement to your umbrella, adding protection to uninsured and underinsured coverage on your underlying vehicle policy. If you’ve got coverage questions, be sure to talk to your agent about how your specific umbrella policy works.
How Much Does Umbrella Insurance Cost?
Umbrella coverage might cost you as little as $150 per year, or around $15 per month, with American Family Insurance. And for that, you’ll typically get around $1,000,000 in coverage above your base policy’s limit. It’s a small price to pay for real peace of mind.
If you feel more protection is needed, additional umbrella coverage is available in other increments.
Get the Umbrella Coverage You Need Today
With so much on the line, having the right umbrella insurance coverage in place can really help to protect your financial future. As more and more households are participating daily in social media and picking up recreational vehicles, the need for a strong umbrella policy has never been greater.
Be sure to reach out to your American Family Insurance agent and request a quote for this important coverage. You’ll find more peace of mind knowing you’ve done what you can to protect everything you've worked so hard for.