In today’s world, People are willing to litigate more than ever. Your Homeowners, Auto, and Boat insurance all have Liability protections. What happens when claims exceed the limit of liability? That’s where Umbrella Insurance comes in.
Umbrella Insurance is a separate policy that can cover amounts that a.) exceed your limit of liability or b.) are not covered by your traditional home or auto policy! For example, you throw a party at your home. An invited guest slips and falls. They break their leg and receive other serious injuries totaling $500,000. Your Personal Limit of Liability is $100,000, with a $2,000 deductible. Under a normal homeowners policy, it would pay $98,000, and you are responsible for the remaining $400,000. Now, lets say you have an umbrella policy with a limit of 1 Million dollars. Under your umbrella policy, the umbrella will cover the remaining $400,000, after your homeowners limits were exhausted.
What if Primary Coverage (Homeowners, Auto, Etc.) Does Not Cover The Loss?
If your primary coverage does not cover a loss, the Umbrella policy is flexible. It can “Drop Down” and cover the loss that was excluded from your primary coverage. In this case, a separate deductible, called a “Self Insured Retention” would apply.
It’s always beneficial to have an umbrella policy, as something as small as hanging a jacket on the wrong hook can cost hundreds of thousands of dollars.