Umbrella insurance is a form of liability insurance. It’s extra insurance over and above liability policy’s limits stated on your insurance policy declarations page. It gives additional coverage to you and anybody else that might be an insured under the policy in case liability coverage on primary liability policies is exhausted. Those other insureds will most likely be your spouse and family members who are residents of your household.
A claim under your umbrella coverage might be made if you have $300,000 in bodily injury coverage through your car insurance, and you caused $600,000 of personal injury damages to a person. Your car insurance is going to pick up the first $300,000, but without umbrella coverage, you’re personally on the hook for the additional $300,000. Because you wanted your family, home and personal assets protected from exactly this type of situation, you purchased umbrella coverage. It will pay that additional $300,000 over and above your car insurance bodily injury limits. That’s what umbrella insurance is for.
Not only does umbrella coverage provide extra protection on automobile liability, it ordinarily provides additional coverage on homeowners liabiliity too. The same excess damages issue could arise if the chimney sweep falls off your roof. The umbrella coverage then triggers when the liability limits on your homeowners insurance are exhausted.
Depending on the policy and insurer, umbrella coverage can include property damage, liability on rental units you own,defamation lawsuits, false arrest, invasion of privacy or other tortious acts. You’ll need certain threshold coverage from the same insurer to qualify for umbrella coverage. Most insurers won’t give you umbrella coverage if you’re driving on $100,000 of libility insurance with another $100,000 liability on your home.
If you do obtain umbrella coverage, it doesn’t insure over everything. Like almost all liability policies, it generally doesn’t cover intentional acts. It won’t pay punitive damages either. For common negligence based liability though, umberella coverage will operate to protect you, your family and your assets. You won’t want to be in a position where those are placed at risk.