Umbrella insurance protects the insured and other members of their household against certain lawsuits. These lawsuits can involve personal injury to others, damage to other people’s property, defamation, landlord liability, and false imprisonment.
In addition to paying for any damages up to the liability limit, the umbrella policy will typically also cover associated legal costs over and above that amount. Within the umbrella there is a “retained limit,” which is similar to a deductible, that the insured is responsible for prior to the insurance carrier paying their portion.
While umbrella insurance provides additional liability protection it does not extend all coverages within the underlying policies. This type of policy does not provide coverage for the insured’s personal injuries or property damage. Nor will it cover liability associated with a personal business. That would fall under a separate commercial umbrella policy.
Most people are uncertain if they have a need for a personal umbrella policy. Umbrella insurance is not required by law but is most often purchased by people who have significant assets to protect or a high chance of being sued.
Some scenarios that may indicate an insured’s greater need for a personal liability umbrella are:
- Own property.
- Have significant savings or other assets.
- Are worried about liability claims against you when traveling outside the U.S.
- Own things that can lead to injury lawsuits such as pools, trampolines, guns, or dogs (check with your insurer to make sure your breed is covered).
- Are a landlord.
- Have an inexperienced driver in the household.
- Coach kids’ sports.
- Frequently host parties in the home.
- Serve on the board of a nonprofit.
- Regularly post reviews of products and businesses.
- Participate in sports where you could easily injure others (such as hunting, skiing, or surfing).
- Are a public figure.
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