An umbrella policy provides extra protection for liability and defense costs beyond what a typical auto insurance or homeowners policy covers. Standard policy limits are usually between $1 and $5 million.
Umbrella insurance is not a “catch-all” policy for everything your primary insurance policies won’t cover; rather, it provides liability protection for a variety of different situations.
It does not cover property damage to your vehicle, home, or personal belongings. For example, if your home was burglarized, an umbrella policy would not cover the cost of damage to your home or to replace the stolen items.
How Umbrella Insurance Works
Put simply, umbrella insurance is excess liability protection. It helps to look at an example. Suppose you’re at fault for a car accident that severely injures four people in the other car. The total damages—including medical costs and lost time from work—are $800,000.
The bodily injury limit on your auto insurance policy only covers $300,000 of these costs, so you’re now liable for the remaining $500,000. It’s not hard to see how this could quickly turn into a financial disaster. Most of us simply don’t have this kind of money socked away. In the situation above, an umbrella policy would cover the extra $500,000 and pay your legal bills.
In short, having an umbrella policy can mean the difference between financial protection and financial ruin.
Who Needs Umbrella Insurance?
Unless you have so much disposable income that a situation like the one described above would hardly make a dent in your savings, you need an umbrella policy. Remember that umbrella insurance protects you against liability. Anyone—regardless of what they own—can be held liable after an accident or other incident.
It’s especially important to have an umbrella policy if you own something that can lead to injury lawsuits, like a pool or trampoline, or if you engage in activities that increase your chances of being sued, such as serving on the board of a nonprofit, coaching kids’ sports, being a landlord, or even regularly posting product or business reviews.
Common Umbrella Insurance Claims
Here are some additional claims that would fall under umbrella coverage.
- Pain and suffering: If you’re found at fault for an incident, whether it’s a car accident or an injury to someone as a result of your negligence, you could be sued for “pain and suffering,” one of the costliest liability expenses. Pain and suffering refers to the psychological stress another person suffered as a result of the incident, and it’s very arbitrary—a judge might award the other person hundreds of thousands or even millions of dollars in pain and suffering. Umbrella insurance can be a lifesaver in this case.
- Dog Bites: It’s every dog owner’s fear, but it can happen. Even the friendliest dog may bite a person or another dog if it feels threatened. If your dog bites someone, you could be liable not only for that person’s medical expenses, but also for their lost wages and pain and suffering. Umbrella coverage could step in where homeowners insurance falls short.
- Homeowners liability: A homeowners policy typically pays for injuries and property damage to others while on your property, but it’s not always enough. An umbrella policy can help make up gaps in coverage.
- False arrest/imprisonment/defamation: If you’re falsely arrested, imprisoned, or defamed, an umbrella policy will pay for defense expenses in such a case; it may also pay for you to fight back and regain your reputation.
- Defense costs: If someone sues you, you’re typically on the hook for lawyer and processing fees. These costs can mount quickly, even for a single trial. Umbrella coverage could help pay your defense fees in court. And, if you’re found at fault, the unused portion of your umbrella coverage can also be used to pay for your liability costs.
How Much Does an Umbrella Insurance Policy Cost?
According to the Insurance Information Institute, a $1 million umbrella policy costs $150-$300 a year (or $12-$24/month). A relatively small price to pay for the peace of mind it brings.
How Do I Get Umbrella Insurance Coverage?
The insurance experts Garvin Insurance Agency are standing by to answer all your questions and provide you with a fast estimate for affordable umbrella insurance. We issue umbrella insurance through Mercury Insurance, one of the most trusted providers in the industry.
Call us at (818) 881-5127 for a free quote today or drop in to our Woodland Hills, CA office. We look forward to working with you.