Let’s talk umbrella policies for a minute! For those of you reading this you probably either already have this policy in place, or you don’t. This short post about this very important policy is mainly for those who do not have it, but those who currently do may learn a thing or two as to why they have made such a good choice to have one in place for their family and their assets.
To summarize how this policy even works I will explain here. An umbrella policy is an extra layer of liability protection for the named insured on the policy. The named insured can include the spouse along with all the household residents, which usually includes the kids (whether they are driving or not). This extra layer of liability protection starts at an additional $1,000,000 of coverage and can go all the way up to $10,000,000 or more depending on the risk and the carrier offering the coverage. But first things first, there are things that need to be in place for a client to even qualify for an umbrella. The client simply needs to have certain level of liability coverage already in place in their “underlying” policies that protect them. These policies would be their home policy, their auto policy, and any other risks that may be involved in their household, such as other rental properties ATV policies, or even golf cart or camper/RV policies.
An umbrella policy’s liability coverage only comes into play when the underlying policy’s liability coverage is exhausted in a claim. For example, if you have the lowest coverage necessary to qualify for an umbrella on your auto policy ($300,000) and it is exhausted while settling the claim for those you were liable for injuring or damaging, it is only THEN that the additional coverage on the umbrella comes in to play to further defend or settle the claim at hand. An example of the umbrella policy coming into play through your homeowners personal liability coverage: Your dog runs out of the house and viciously attacks a neighbor who was going for a walk. Your neighbor sues you to cover her medical bills, lost wages, and pain and suffering. If these damages are over your homeowners liability coverage, the umbrella policy comes in to cover the additional amounts up the policy limits of the umbrella.
Another umbrella scenario involving your auto policy can be something like this: You cause a multiple auto accident and your auto insurance property damage coverage isn’t high enough to replace or repair all vehicles’ damage you are liable for, additionally your personal liability coverage may not be high enough to pay for their medical bills.
This additional coverage helps protect the assets of the insured and anything else that can be used to settle large liability losses in the state in which your primary residence is in. Every state is different. If you ever need a professional agency to discuss your exposures and how to protect them, feel free to reach out!