Umbrella Insurance? What Is It?

Are you not really sure what an umbrella policy is? Certainly it doesn't protect you from the rain, right? So, what is it exactly? Well, umbrella insurance is extra liability insurance. It is designed to protect you from major claims and lawsuits and as a result it helps protect your assets and your future. It does this in two ways:

• Provides additional liability coverage above the limits of your homeowners, auto, and boat insurance policies. This protection is designed to kick in when the liability on these other policies has been exhausted.
  
  
• Provides coverage for claims that may be excluded by other liability policies including: false arrest, libel, slander, and liability coverage on rental units you own.

What Does Umbrella Insurance Cover?

Still a bit hazy on what an umbrella policy covers? Well, let's dig into the details a bit. Umbrella insurance provides coverage for injuries, damage to property, certain lawsuits, and other personal liability situations listed below. "That's all well and good," you're thinking, "but I have auto and homeowners insurance that covers some of these situations." True! But, umbrella insurance insures you above and beyond the limits of those policies and, in addition, it covers some situations that aren't covered by the other types of policies you have.

Here are examples of the types of coverages provided by an umbrella policy and how they protect you:

Bodily Injury Liability – covers the cost of damages to another person's body. Examples include the cost of medical bills and/or liability claims as a result of:

• injuries to other parties due to a serious auto accident where you are at fault,
• harm caused to others as a result of your dog (yeah, you probably should have taken him to obedience school),
• injuries sustained by a guest in your home due to a fall, or
• injuries sustained by a neighbor's child who falls while playing in your yard.

Property Damage Liability – covers the cost of damage or loss to another person's tangible property. Examples include the cost associated with:

• damage to vehicles and other property as a result of an auto accident where you are at fault,
• damage claims incurred when your pet rips a friend's priceless oriental rug to shreds, or
• accidental damage to school property caused by your child (hey, you can't disown them).

Owners of Rental Units – protects against liability that you may face as a landlord. Examples include the cost of liability claims as a result of:

• someone tripping over a crack in the sidewalk of your rental property and suing you for damages, or
• your tenant's dog biting someone and you being held responsible for the injuries.

Coverage is also provided should you be sued for:

• slander – injurious spoken statement,
• libel – injurious written statement,
• false arrest, detention, or imprisonment,
• malicious prosecution,
• shock/mental anguish, and
• other personal liability situations.

Need An Example?
So, let's look at an example to help you better understand how an umbrella policy would work to protect you. Let's say you cause an auto accident and the cost of the injuries you cause to others is $500,000. Let's further say that the Bodily Injury limit on your auto insurance is $300,000. Your auto policy will cover $300,000 of the injuries. But who will cover the remaining $200,000? Your umbrella policy will. It will cover the amount above the limit set in your auto policy, up to the limit you choose for your umbrella policy. Now, isn't that peace of mind?