Quick Guide: Understanding Umbrella Insurance

What good is insurance if it doesn’t offer the protection you need? We all need insurance of one type or another. If you drive, you need auto insurance. Whether you own or rent your home, you should have homeowners or renters insurance to protect your assets. However, most insurance doesn’t cover everything. 

Umbrella insurance, also known as personal liability insurance, provides an added layer of liability protection to protect your assets, including your home, your retirement funds, and your life savings. Even the best insurance has gaps and limits on what it will cover. For example, your automobile insurance coverage has limited liability coverage, so in the event of an accident, if damages to the other party exceed the liability limit, you have to pay the difference.

Consider that, in Washington and Oregon, motorists are required to carry $25,000 of liability insurance for bodily injury and $50,000 liability coverage per accident. Additionally, Washington requires $10,000 for property damage, and Oregon requires $20,000 for property liability. If you are in a serious accident, costs could easily exceed those limits. If there are multiple parties seriously injured in the other car, the car is expensive and requires more than $25,000 in repairs, and one of the injured passengers is a doctor who cannot work for some time, then you could be looking at costs up to $500,000, which is well beyond the required liability coverage. The figure could be even higher if there is a lawsuit, as well. 

If there is an unexpected, catastrophic, and expensive accident, then you don’t have to worry about losing your life savings or your home to pay the damages if you have umbrella insurance.

What Umbrella Insurance Will Cover

Umbrella insurance is designed to fill the gaps in other types of insurance coverage to give you added protection where you are most likely to need it. The most common types of umbrella insurance provide liability coverage for: 

• Bodily injury: This covers injury to another person that is your fault, including costs to treat injuries and even funeral expenses.
  
  
• Injury to reputation: If you slander, libel, or defame another person and injure their reputation, they can sue you. This can be defamation in person, in print, on social media, or via other methods. Umbrella insurance will cover legal costs.
  
  
• Property damage: As in our example above, if you get into an accident or damage someone else’s property—whether it’s a car, a wall, a building, or something else—umbrella insurance will cover expenses beyond what is covered by your insurance.
  
  
• Court costs: What happens if you end up in court to defend yourself? Umbrella insurance will cover legal fees and court costs.

What Umbrella Insurance Will Not Cover 

Of course, umbrella coverage won’t protect you from every possible type of liability. There are some things that umbrella insurance will not cover:

• Personal property: Umbrella insurance is designed to provide liability coverage, so it protects you if you harm someone else. It won’t protect your personal property or belongings.
  
  
• Criminal acts: If you purposely harm someone else, either causing deliberate damage or injury, you will not be covered.
  
  
• Flood damage: Floods are one of those acts of God that are not covered by umbrella insurance. Whether you own or rent your home, if you are worried about flood damage, you should consider taking out flood insurance. However, if you have a pipe burst and it damages your downstairs neighbor’s property, that would be covered by umbrella insurance.
  
  
• Contracted worker injuries: If you have contractors doing work on your home, you may be liable if a worker is injured. Many contractors have their own accident coverage, but if they don’t, then umbrella coverage won’t help you. Be sure to read contract disclosures carefully.

Should You Get Umbrella Insurance? 

Depending on your circumstances, umbrella insurance may seem like an unnecessary expense; however, there are many situations you may not have considered that could put you and your assets at risk. You should consider umbrella insurance if you:

• Own vacation property: If you have a vacation home or even vacant property, then you want to be protected if someone sues you for being hurt on your property, even if you don’t invite them.
  
  
• Rent out a property: If a tenant or one of their guests is injured on your property, they can sue you for more than your landlord’s insurance may cover.
  
  
• Drive an expensive car: If you are driving a luxury car, you are telling the world that you have money, which means they may be more inclined to sue you in case of an accident.
  
  
• Own a boat, an RV, or an ATV: If you have recreational vehicles that someone might borrow or on which they might be injured, you should have umbrella coverage.
  
  
• Have frequent guests or parties: Remember that anyone who is injured or has an accident on your property can sue you for damages.
  
  
• Have “attractive nuisances”: If you have something on your property that could attract a curious child, such as a trampoline, a treehouse, or even a pool, those are considered attractive nuisances and warrant additional umbrella coverage.
  
  
• Are active on social media: If you or a member of your family are active and opinionated on social media, then you may be unwittingly open to a slander or libel suit.
  
  
• Are a public figure: If you are well known, hold a political office, or even have conspicuous wealth or property, you could be a target for a lawsuit, so be sure to protect yourself.

These are just some of the telltale signs that indicate umbrella insurance is a good idea. You want to be sure to have enough insurance to protect your home, your property, and your savings if there is a disaster.

If you think you need additional protection from umbrella insurance, consult with an insurance expert. The professionals at insureQ can guide you as to the types of insurance available and the amount of coverage you need.