What is an “Umbrella”? And is it really necessary?
In the insurance world when people say “umbrella policy” they are not talking about an insurance policy to cover your beautiful umbrellas.
The long winded name of an umbrella policy is called a Personal Umbrella Liability Policy. The reason people call it an umbrella, is because it covers you and your stuff like an umbrella would cover you. Think of your home, autos, and any other assets you might have such as a boat, trailer or motorhome, any rental properties, now imagine them all huddled under a giant umbrella protecting them from the “rain” aka perils. That is what an umbrella policy does, it protects your assets so you won’t lose them because of a liability claim.
Now if you have current insurance on these things you do have some amount of liability coverage. The average is usually between $100,000 and $500,000 worth of personal liability coverage. However, if you have more than $500,000 to lose which if you are a homeowner, and own any vehicles that pretty much guarantees that you do. That $500,000 gets eaten up pretty quickly and then you are left with the remaining balance. To top it off that $500,000 example is only applicable if you have the higher limit, if you only have $100,00 0r $300,00 in personal liability then you are on the hook for any remaining payments to be made. A personal umbrella policy covers you for much higher limits usually around 1 million, where your other policies cap out at that personal liability amount, whatever it may be set to.
Most people think of a personal umbrella policy as covering you only in the event of a tragic major accident where you are held liable for other’s bodily injuries, which it does. However, it covers you for so much more than just that instance. A personal umbrella policy covers you against slander or libel, landlord liability, property damage liability, and other various situations that involve bodily injury.
Encompass Insurance has a short super informative video explaining how a personal umbrella policy works and why it is such an important protection in today’s crazy world. Just click on the hyperlink below, and don’t forget to call your agent after to ask follow up questions on how you are being covered.