InsuranceThought — Blogs About Insurance

Unfortunately, there are several myths that surround umbrella liability insurance:

• It is too difficult to coordinate with an existing insurance policy (i.e. your homeowners)
• Premiums are too pricey
• It is only for those who are rich (in other words, have much to protect)

These myths are just that – myths. Umbrella liability coverage is actually quite affordable, is not meant just for those who have more than the average Joe, and coordinate easily with existing insurance policies.

The term “umbrella liability” is so named as it acts like an “umbrella” over your auto and homeowners (or renters) liability policies to provide you with even more protection.

Here are some examples of when your umbrella coverage would give you the extra insurance you need:

• Someone injures themselves while on your property, then sues you under your homeowners insurance.
• An item from your property causes an accident on another’s property because of a natural disaster (i.e. a tree in your yard falls during a storm and hits your neighbor’s car).
• Someone you’ve hit with your car sues you under your auto insurance policy.

Your homeowners and auto policies do have some liability coverage that is part of your regular insurance and would assist you in settling legal claims should the circumstances arise; but what would you do if a settlement/judgment required you to pay the injured person(s) $100,000 and you are only covered with $450,000 of liability? Your insurance company would pay the $450,000, of course, but where would you get the remaining $550,000? You would likely lose everything in an effort to pay off the debt. Some states do protect certain types of assets (i.e. your home) from being taken, but there still is much to lose.

This is where umbrella liability insurance comes into play; an umbrella policy will pay over and above what your basic policy will, so you could potentially have several million dollars worth of coverage you might otherwise be without. And, truly, for the protection it offers, liability premiums are really very reasonable. You can usually find $1 million worth of coverage for just $200 or $300 a year. The cost, as with any insurance, will vary by the criteria you use, like the amount of coverage you choose and your personal risk factors (i.e. if you live in an area prone to tornados or perhaps your credit history).

Umbrella policies do usually carry high deductibles – $300,000 or more is pretty typical – but they are designed not to kick in until your other policies are fully utilized. If you opt to get your umbrella policy through the same company with which you have your auto and homeowners insurance, you will likely receive a substantial discount on your premiums; additionally, you won’t have to deal with several companies if you should ever have to utilize the policies.

It’s definitely worth considering the extra coverage an umbrella policy has to offer. After all, you never know when disaster will strike – it’s always better to be safe than sorry.