You own your home, have your own business, and drive a new car. Though you are not rich, you are comfortable. It would be a shame to lose it all if someone sustains injuries by your car or at your home or place of business.
You have insurance, you say; you have standard auto liability insurance. The limits are $100,000 for a single person and a total of $300,000 for multiple people.
Suppose you are responsible for an accident involving a shuttle taking ten people to the airport. Three hundred thousand dollars allows on average $10,000 per person, which is hardly enough to cover emergency room fees, let alone surgery, rehabilitation, lost wages, and other medical expenses. If there is a fatality, bankruptcy is a real risk.
Your business has a small storefront on a busy street. A middle-aged executive comes in after a rainstorm, your floor is wet and slippery, and the executive slips and falls, strikes his head, and loses consciousness.
Your general business liability insurance may have the same $100,000 limit as your auto policy and cover part of the hospital bill. If the executive is permanently disabled and sues for future wages of $1 million, a sole proprietorship could face bankruptcy; in situations like this, consider Umbrella Insurance for Human Service Providers.
Your son invites a friend over for a swim in your pool and the friend dives into the shallow end, strikes his head, and suffers traumatic brain injury. Sadly, the damage may be permanent, and with standard liability limits of $100,000, personal bankruptcy is possible.
The inexpensive, elegant solution to these problems is umbrella insurance. When a claim exceeds your standard liability insurance limits, your umbrella policy takes over and pays up to your umbrella liability limits.
Many people extend their liability limits to $5 million; for more on excess coverage options, see Personal Excess Catastrophe Insurance.
Though you hope never to use it, for a relatively small annual premium you can protect your assets and avoid financial disaster. Umbrella insurance typically pays when you are legally responsible for an injury that exceeds your standard liability limits. If you want to compare options, talk to your agent.
Frequently Asked Questions
What does umbrella insurance cover?
Umbrella insurance provides additional liability protection above the limits of your underlying policies, such as auto and homeowners insurance.
How much umbrella coverage should I carry?
The appropriate amount depends on your assets, exposure, and risk factors; many people choose limits in the millions for broader protection.
Does umbrella insurance cover business claims?
Personal umbrella policies generally cover personal liability exposures, but business-related liabilities may require a separate commercial umbrella or excess policy.
Will umbrella insurance protect my assets if I’m sued?
An umbrella policy can help protect assets by covering liability amounts that exceed your primary policy limits, reducing the risk of financial loss.