What do umbrella policies do?
Insurance professionals can't help themselves. We rely on wonk-ish diatribes to describe umbrella policies because they are technical in nature.
So let's try to simplify.
Most companies buy insurance because they are required by law. Workers' compensation and automobile liability allow companies to hire employees and use public highways, and lenders or landlords often require property or premises liability insurance.
But the real reason to buy insurance is to trade a known loss (premiums) for unknown losses (claims). Your company can budget for the acceptable level of known loss, which protects against normal, everyday risks of running a business.
Now the umbrella policy: you're buying catastrophic loss coverage for imaginable claims — the multi-passenger near-fatal car wreck or a nightmare products liability case that costs millions in damages. For a broader introduction, see Understanding Umbrella Insurance.
Claims often outside primary policies
- Do you promote your company through social media? Libel and slander losses are covered by personal injury liability, which is often excluded in general liability policies but typically included on umbrellas.
- Do you send employees out of the country? Standard general and automobile insurance commonly limit territory to the United States and Canada, while many umbrella forms extend coverage worldwide.
- Any possible sexual harassment claims in your organization? Those exposures are often excluded from general liability but may be covered by umbrella or excess policies.
These examples of rare occurrences show why umbrella liability matters. Your company can be blindsided by large liability claims that your primary liability coverages do not anticipate.
Broaden the territory, widen the safety net, pay a little more premium, and get more peace of mind; for more on excess-versus-umbrella differences see Excess and Umbrella Liability Insurance.
Trade a small, known loss — your umbrella premium — for a lot of protection against the unimaginable loss, and if you want to review options, talk to an agent.
Frequently Asked Questions
What is the main purpose of an umbrella policy?
An umbrella policy provides extra liability coverage above the limits of your primary liability policies to protect against large or unusual claims.
Does an umbrella policy cover libel or slander from social media?
Many umbrella policies include personal injury coverage that can respond to libel or slander claims that primary general liability policies may exclude.
Will an umbrella policy cover incidents that happen overseas?
Umbrella policies often broaden territory limits and may extend worldwide coverage, but you should confirm territory language and any specific exclusions with your insurer.
Do I need an umbrella policy if I already have general liability and auto insurance?
If you face exposures that could produce catastrophic losses or gaps not covered by primary policies, an umbrella can provide an added layer of protection and financial security.