Simply, a personal umbrella liabiilty policy is additional liability coverage for you that sits on top of and spreads across (hence the term "umbrella") your existing liability coverage on all of your property and vehicle insurance, such as home, auto or landlord policies. A $1,000,000 umbrella policy would add a million dollars protection to the liability coverage that is already on your policies.
A personal umbrella liability insurance policy is extra liability insurance coverage that increases the limits of liability across all of your current property insurance policies, whether home, auto, motorcycle, rental properties, watercraft. The umbrella policy provides an additional layer of security for persons who are at risk for being sued for damages to other people's property or injuries caused to others in an accident. If you are ever sued, your standard homeowners or auto policy will provide you with some liability coverage, paying for judgements against you and your attorney's fees, up to the limit set in the policy as stated on your declarations page. Look at your current declarations pages for Home or Auto and other property insurance policies and see what the Liability limits are. That figure is the maximum that your insurance company will pay in the event that you are found responsible for bodily injury or property damage to others. However, in our litigious society, you may want to have an extra layer of liability protection. That's what a personal umbrella liability policy provides.
An umbrella policy kicks in when, in the course of a liability claim against you, the limit on the underlying liability coverage is reached and will provide no more protection for you. For instance in a homeowners, renters, condo or auto insurance claim, you may have $250,000 liability limits on your policy and the injured party is claiming $500,000 in damages. Your existing insurance company will pay the $250,000 and the umbrella will cover your liability exposure above that. If you did NOT have the umbrella policy, your existing auto policy, for instance, would pay the $250,000 and walk away. Their obligation to you is done. If the $250,000 paid by your auto insurance company did not fully compensate the injured party, and you have assets that can be attached in a lawsuit, then the injured party can sue you for whatever they can get.
Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. Most insurers will want you to have about $250,000 to $500,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before selling you an umbrella liability policy for $1 million or higher of additional coverage.
How much liability coverage should you have? One way to look at it is to use the analogy of a wall. Liability insurance acts as a wall between you and a lawsuit. The height of the wall is how high your limits of liability are. YOU are as tall as the total value of your assets. Are you taller than your wall of liability coverage? Do you have more assets than you have protection in the form of liability coverage? You are exposed to a lawsuit to the extent that you, which is to say your assets, are taller than the wall of your liability coverage.
Let the Stephen B. Groton, California Insurance, help you understand and protect all of the risks you run and all of the perils your financial life faces. We will do this with a well thought out and executed business insurance policy designed just for our Personal Umbrella Insurance policy holders.