Reasons to Consider an Umbrella Policy

Your home insurance policy provides personal liability insurance, and your auto insurance provides liability protection for auto-related claims. But this can extend the coverage limits of these policies while also introducing coverage for additional risks. 

For most personal liability risks, an umbrella policy becomes secondary coverage. In other words, your primary (home or auto) insurance policy pays on the claim first and then your policy can help pay liability claims that exceed the coverage limits on the underlying (home or auto) policy.

For example, if someone gets injured at your home, your home insurance policy is your primary coverage. 

In this example, you have $300,000 in liability coverage through your home insurance policy. If a court finds you liable for $500,000, your umbrella policy can pay the difference of $200,000. Without this coverage, you may have to sell assets or liquidate savings to cover the liability. In some cases, future earnings may even be at risk.

Coverage for auto-related liability claims works similarly, with your umbrella coverage stacked on top of the primary coverage provided by your auto insurance policy.

Here is an example of how coverage limits work.

Umbrella policy require base coverage amounts. We can use these amounts below:

• Home insurance personal liability limit: $300,000
• Auto insurance bodily injury liability per accident: $500,000

Now, if you purchase an umbrella policy: $1 million, the amounts get stacked. The umbrella extends your coverage limits by the amount of the umbrella policy.

• Home insurance personal liability limit: $1,300,000 
• Auto insurance bodily injury liability per person: $1,000,000 
• Auto insurance bodily injury liability per accident: $1,500,000

But higher coverage limits are only one benefit of an umbrella policy. It can also brings coverage for new risks. A standard home insurance policy will not cover claims due to libel or slander. But an umbrella policy can cover you and your household for these risks while also providing expansive coverage limits for bodily injury or property damage liability. 

Your coverage also travels with you, protecting you at home and while away.

To learn more about umbrella insurance and discuss insurance strategies to protect your home and family, reach out to your broker to schedule a policy review.