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What Is Umbrella Insurance?
I recently wrote an article to explain umbrella insurance. If you missed it, you can find it here.
Personal umbrella insurance policies increase policy limits and therefore, act like excess liability insurance policies. However, they usually cover additional risks like libel and slander or risks involved if you are a director or an officer of some kind of organization. They therefore fill some gaps that are not covered by the primary insurance policy.
As to the officer or director type of risk, it is always a good idea to make sure that the organization in which you will serve has its own coverage under which you are insured for your actions in your capacity. There are special policies designed for that specific risk.
Generically, umbrellas exist to protect against the deluges, whereas the first layer(s) of liability insurance protects against everyday rain showers. As we said, umbrellas provide insurance coverage additional to the underlying limits. Personal umbrella insurance policies come in a variety of face amounts, often starting at $1Million. Those designed for commercial entities can have very high liability limits.
Often, a business will buy several “layers” of this kind of insurance, with different “attachment points.” The “attachment point” is the dollar amount at which lower layers of insurance have been exhausted and the umbrella kicks in.
As I’ve said before in other articles, I don’t not sell insurance. I’ve never sold insurance. I don’t get kick-backs from anyone who does sell insurance. But I do want you to understand insurance so you can make good decisions. And if you need to help your insurance problems, I’m here to provide that help.
At this point, you may be saying to yourself, “Self, why do I need $1 Million or more worth of insurance? Even if I need it, how can I afford it?”
Do I Need Personal Umbrella Insurance?
You asked the questions, so here are some situations to start you thinking:
Remember how I said that the umbrella policy sits atop the underlying (“primary”) insurance policy and provides additional liability coverage?
Consider the following scenario:
1. You are involved in an automobile collision that is your fault
2. The other car was driven by a young mother and her child was in the car. The child was not injured but the mother was killed
3. You had $100,000 total automobile liability insurance
4. Are the $100,000 liability limits likely to be enough to compensate the victim’s family? Probably not.
5. You have assets, such as an IRA, savings, or a vacation home
6. What happens if you get sued and are found at fault? You stand to lose those assets.
Now, consider this scenario:
1. You are the sole or main support of your family. You could be a surgeon, an artist, or in any other profession or occupation that requires eyesight and you have a young child
2. You are involved in an automobile collision that was not your fault with a person who had no liability insurance or just the state-required minimum liability insurance, and you lose your vision
3. You had liability insurance on your car of $100,000 and chose to buy the same amount of uninsured/underinsured insurance or had rejected it totally
4. Even if you had $100,000 in uninsured liability insurance, is it likely to be enough money to compensate you for your injury? Again, probably not.
5. A personal umbrella policy would have the effect of increasing not just the amount of your liability insurance, but ordinarily, your uninsured motorist coverage.
Personal umbrella insurance policies work with and complement the underlying policies. They are usually issued as separate policies. The insurer will require a minimum amount of underlying coverage to issue one and there may be other underwriting requirements.
These kinds of insurance policies are relatively inexpensive, certainly when compared to the primary insurance policies. The reason is because the deluges are fairly infrequent; most occurrences for which insurance answers are the rain showers. Therefore, the primary insurance policy takes on most of the risk and the premium is higher to offset it.
So, should you consider personal umbrella insurance? That decision is best made consulting with your insurance broker.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]