The sad truth is, we live in a highly litigious world. Rarely does a day goes by where there is not a story in the newspapers about a new lawsuit being filed-both for serious and for frivolous reasons. Being served with legal papers notifying you that a lawsuit has been filed against you is a very unsettling experience. You notify your insurance company and believe all is well until you speak to your company appointed attorney and are told that the suit is seeking damages greater than your policy limits. Now what?
Umbrella policies provide an extra layer of coverage to both your homeowners and car insurance policies. If you are involved in a lawsuit and your liability coverage isn’t enough to cover the claim, having an umbrella policy will help protect your home, your car, and other assets that someone may go after in trying to collect.
Who needs an umbrella policy?
As with purchasing any type of insurance, be sure to evaluate what assets you want covered and what the likelihood of you getting sued is. If you have a dog, own a swimming pool, hot tub or boat or if you frequently entertain guests purchasing an umbrella policy may be a good idea. If your risks are relatively minimal your agent may suggest increasing your homeowners and auto liability limits as a more cost effective option. However, as no one can predict the future and with million-dollar settlement verdicts becoming more common, an umbrella policy may be the best way to go.
What does a personal liability umbrella policy protect??When you buy a personal liability umbrella policy, you are buying a broader insurance coverage range with higher liability limits. Primary policies such as homeowners and auto, generally cover bodily injury and property damage, but with personal liability umbrella policy coverage, you can include personal injury, property damage or bodily injury-which may be caused by you, your pets, or your dependents. Along with a personal injury protection, you may be covered in the unfortunate event of:
• False arrest
• False imprisonment
• Defamation
• Invasion of privacy
• Malicious prosecution
• Eviction
• Wrongful entry
Some umbrella policies go as far as giving you coverage if you’re charged liability while actively participating on the board of a charitable, religious or civic organization.
It’s important to remember that even if the lawsuit is frivolous or silly, you will still need to pay the expenses for defending yourself.
When umbrella policies go to work?
After your liability insurance in your homeowners or car insurances has run out, umbrella polices will kick in. They cover the amount above what your homeowners or car insurance policies capped out, up to the limit you selected. Many companies will only issue you an umbrella policy if you have both your car and homeowners insurance with them. Also, they may require your primary liability limits be at least a certain amount. The reason that most umbrella policies are so inexpensive is that the policy is just added protection. If you are sued, the bulk of the cost is taken from your homeowners or car insurance, then the rest falls on the umbrella.
Umbrella policy exceptions?
Umbrella policies vary from state to state, so depending on where you live, your umbrella coverage may not cover you for everything and anything you may be sued for. For example, many policies won’t pay for punitive damages-which are generally used to punish people for their conduct. Intentional acts are another that will not be covered by an umbrella policy, as well as if a claim results from a business endeavor.
