“I wouldn’t drive on an interstate if I didn’t have a personal umbrella insurance policy.” That statement came during a speech from the CEO of an insurance company; one which, coincidentally, also sold personal umbrella policies bundled with their home and auto insurance. Though his opinion may have been biased, personal umbrella policies are still the least expensive policies available considering the coverage they provide. They are a great buy.
Home and auto insurance policies may not have high enough limits for certain claims. That is why personal umbrella insurance exists. Consider a few real-life examples of where a personal umbrella insurance policy would have been a benefit:
The Clumsy Plumber
A client had a plumber and trim carpenter working on their house at the same time. The plumber was walking down the stairs after finishing a job and grabbed the handrail that the carpenter was working on. The handrail wasn’t secured yet, gave way, and the plumber fell, severely injuring himself. He sued the homeowner for injuries and lost pay due to extensive time off work.
A kind neighbor picked up the mail for a vacationing neighbor, leaving it inside the vacationing neighbor’s home. Unfamiliar with their sticky front door, she failed to pull it all the way shut when leaving. It was wintertime and the wind blew the door open and exposed the interior to freezing weather. The next day all pipes were frozen, burst, and water flooded all levels. The vacationing neighbor’s insurance company (not the vacationing neighbor) sued to recover damages.
Jumping Good Time
A trampoline…need I say more? Without pointing blame, the facts are that, as fun as they may be, people, many times young children, can be seriously injured while using a trampoline. As a result, homeowners are sometimes sued. Personal injury cases such as these can exceed the homeowner’s personal liability insurance limits.
As the CEO’s opening statement suggests, any car accident has the potential to surpass the limits of an auto insurance policy. Vehicles are easy to be fixed, but people aren’t. These accidents can be costly, and multi-vehicle crashes are not uncommon. An insurance company is only liable for the maximum policy limit, after which the client is responsible for any remaining settlement.
A personal umbrella insurance policy is an extra layer of protection above certain insurance policies such as your home, auto, motorcycle, RV, and/or personal watercraft. Those individual policies are named on the personal umbrella insurance policy, indicating it increases coverage limits by paying when those underlying policies are exhausted. For example, if a client has a $500,000 limit on their personal auto policy and a $1,000,000 limit on their personal umbrella insurance policy, their total liability for auto-related claims would be $1,500,000.
Umbrella Versus Excess Liability
However, a personal umbrella insurance policy doesn’t only increase coverage limits, it also provides extra coverages where others leave off. For example, personal umbrella insurance helps pay for a libel or slander judgment, while many standard homeowner’s policies do not. Umbrella policies also extend to cover other members of your household, such as spouse, children, and other relatives who live in your home. Plus, they include certain protection for actions if you volunteer to serve on the board of a nonprofit. Lastly, a personal umbrella insurance policy travels with you. In fact, these policies apply anywhere in the world, whereas most underlying policies are limited in their territory and only apply to occurrences within the U.S.
This is where clients can confuse a personal umbrella insurance policy with an excess liability insurance policy. The two are not the same. Even though both list the underlying insurance policies over which they extend coverage, excess liability policies only provide additional coverage for the same risks as the underlying policies and come with the same exclusions. In this manner, excess liability insurance policies generally provide more narrow coverage than personal umbrella liability insurance.
What Does a Personal Umbrella Policy Not Cover?
Like all policies, umbrella policies have limits and exclusions. Here is a better look at the most common:
Your Personal Property
Although they will pay if you are liable for damaging someone else’s personal property, they will not pay for damage to your own. That would properly be covered by carrying adequate limits on your homeowners or renters policy.
Anything related to your business is not covered. Damaging other people’s property, bodily injury, or any liability related to your business is excluded. This exclusion applies even if the company is home-based. If you earn money providing a service out of your home, any liabilities resulting from that arrangement will not be covered.
A personal umbrella insurance policy won’t protect you from the consequences of your own intentionally harmful or illegal behavior.
How Much Does a Personal Umbrella Insurance Policy Cost?
Please read this entire paragraph before commenting. An average cost for a $1,000,000 limit on a personal umbrella liability policy, assuming a homeowner in an average U.S. suburban neighborhood, owning two normal vehicles and the driver(s) possessing clean records, will cost around $200 per year if bundled with home and auto. That said, it is not uncommon for costs to be higher for reason. Items that will drive up the cost are unbundled (separate) policies, certain breeds of dogs, trampolines, boats and personal watercraft, age of drivers in the household, number of drivers, poor driving records, and prior claims on any underlying policy. For example, it is not uncommon for when a resident in the home turns sixteen and receives their license for both the cost of auto insurance and personal umbrella insurance to increase. Any driver living in the household will affect not only the cost of underlying auto insurance, but also a personal umbrella insurance policy.
Questions on your personal umbrella insurance policy? Policies vary, so please read it or contact your Bankers Insurance agent. We will help determine your risks and advise how to best cover them. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.