Personal umbrella insurance is today’s modern approach to financial security. Chances are thin that you’ll lose a lawsuit for an amount more enormous than what your insurance will cover. However, if you ever did find yourself in that situation, you could lose all your savings. Umbrella insurance is designed to ensure you never find yourself living that nightmare.

Today, we’ll look at how a personal umbrella policy works, who needs it, how much it costs, and what it won’t cover.

What Is Personal Umbrella Insurance?

Personal umbrella insurance is a type of private liability insurance that can be indispensable when you find yourself liable for a claim more significant than your homeowner has or what auto insurance can and will cover. If you’re a boat owner, personal umbrella insurance will also pick up where your watercraft’s liability insurance leaves off.

Umbrella insurance even covers specific liability claims those policies may not, such as libel, slander, and false imprisonment. And if you own rental property, personal umbrella insurance provides liability coverage beyond what your renter’s policy covers.

What It Covers

Personal umbrella policies provide excess coverage above and beyond what is provided by your homeowners and auto insurance policies. This umbrella policy usually provides roughly $1 million to $5 million in additional coverage. In addition, receiving more than this amount is possible if you have and need to protect lots of assets.

Legal Expenses

When talking about the legal expenses you’ll incur if you’re sued, personal umbrella policies cover legal fees on top of the policy amount. The procedure may also pay you if your appearance at legal proceedings causes you to lose pay from work. Because your insurance company’s money is at risk when you’re sued, it’ll want to protect that money with its legal team, possibly a better legal team than you could afford.

Protecting Dependent Children That You Have

Aside from covering you for accidents on your property or car accidents you are found to be at fault for, personal umbrella insurance can also protect your dependent children. In addition, all accidents caused by you or your dependent children during the operation of a watercraft, accidents happening on rental property you own, and personal injury lawsuits resulting from libel, slander, false arrest, defamation of character, malicious prosecution, detention or imprisonment, abuse of process, shock or mental anguish, and possibly more. Consult your specific policy provider for these important details.

What Personal Umbrella Insurance Doesn’t Cover

Personal umbrella insurance is a form of private insurance that won’t protect you from lawsuits related to your business. This coverage includes babysitting, or “compensated child care” in insurance terminology, by the insured since this setup would already be considered a business. However, your umbrella policy may still cover your children if they babysit part-time on someone else’s property.

Excluded Activities

Additionally, personal umbrella insurance does not cover high-risk activities like drag racing or other related ones of unnecessary use of vehicles. Also, it may not cover all car types like truck tractor-trailers, recreational motor vehicles, farm tractors or trailers, or, more generally, those vehicles that can exceed a specific weight limit, such as 12,000 pounds. This insurance policy won’t cover damage to your car since your auto insurance should provide for that you or damage to your property because your homeowners’ insurance should be the one who protects it.

Crimes and Intentional Acts

An umbrella policy won’t cover if you commit crimes, such as driving under the influence and are obliged to pay restitution. Likewise, the insured does not cover intentional acts like discrimination, sexual harassment, deliberate property injury, intentional bodily injury, and other willful and malicious acts. As old as the old saying goes, “crime doesn’t pay.”

Healthcare Costs

Furthermore, a personal umbrella policy does not provide coverage on excess health insurance. Most providers of health insurance policies have specifics on what they will pay as annual and lifetime limits. When concerned about low amounts, you will need a more comprehensive health insurance policy since personal umbrella policies won’t help you with these specific concerns.

Generally, the examples mentioned earlier are only a few things that personal umbrella insurance policies will not cover. Due to a few existing exclusions, ask your insurance agent if you’re concerned about being covered for specific events. Discuss if personal umbrella insurance will cover it. If not, ask what additional policies you can purchase to protect yourself.

Underlying Insurance Requirements

Since personal umbrella insurance policies are designed to be forms of secondary insurance, they will have underlying insurance requirements. This incident means you’ll have a certain amount of homeowners and auto insurance coverage as approval conditions for a personal umbrella policy.

Combining Coverage

Additionally, some personal umbrella insurance providers will require you to have your auto and homeowners insurance before issuing you a personal umbrella insurance policy. At times, having all policies with one insurer can save you money. However, sometimes it doesn’t. Switching your auto and homeowners insurance policies to the umbrella provider can make personal umbrella insurance more expensive than umbrella insurance premiums themself. When you don’t have underlying insurance requirements for a personal umbrella insurance policy, this move will also effectively make your umbrella insurance policy more expensive.

What Can Increase Your Risk of Being Sued

You are much less likely to need a personal umbrella insurance policy when you are always taking public transportation and don’t own any property. On the other hand, a few things could potentially increase the need to require a personal umbrella insurance policy. The following are only a few of them:

  • Long commutes
  • Driving during rush hours, when drivers have the highest likelihood of getting into accidents
  • Homes that have swimming pools
  • Owning a dog
  • Frequently having guests over to visit or stay

The Bottom Line

Personal umbrella insurance policies are a need for specific reasons. Not only because you are not at high risk of being sued does not mean you are not at risk at all. Even if you are very careful, personal umbrella insurance can be considered inadequate luck insurance. Probably the safest course of action is to get insurance. Remember, when your financial situation changes, you may need to add more coverage in the future. A personal umbrella insurance policy might be the thing you need.

If you’re interested in having personal umbrella insurance, our great friends at Risk Managers, LLC

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