Before we answer this question, let’s define umbrella insurance. Umbrella insurance is a type of personal liability insurance that covers claims in excess of regular homeowners, auto, or watercraft policy coverage. It covers not just the policyholder, but also other members of their family or household. It’s important to note that umbrella insurance coverage covers injury to others or damage to their possessions; it doesn't protect the policyholder's property.
You may be thinking, “Well, what instances would I need this coverage? Is it really necessary?”
Umbrella insurance covers you and members of your household against lawsuits involving personal injury to others, damage to other people’s property and a variety of claims such as defamation, landlord liability and false imprisonment, depending on your policy.
In addition to paying out any damages up to your liability limit, your umbrella insurance will typically also cover associated legal costs over and above that amount. For example, if you have an umbrella policy with $1 million of liability coverage, and you were sued for that full amount, your insurer would pay out the $1 million plus provide your legal defense or cover your fees. A "retained limit" — which is similar to a deductible in that you’re responsible for paying it before your coverage begins to pay out — might apply.
While umbrella insurance isn't required by law, it is most often purchased by people who have a lot of assets to protect or run a higher risk of getting sued. You may consider umbrella insurance coverage if you own a significant amount of property or other assets, have a young, inexperienced driver in your household, or own things that may lead to injury lawsuits (such as dogs, swimming pools, and trampolines).
If you are wondering if umbrella insurance is a good idea for you, give us a call! We would love to help you understand this coverage better and help you determine whether or not umbrella insurance is necessary in your situation.