Umbrella Insurance Policies
Created by FindLaw's team of legal writers and editors | Last reviewed June 01, 2017
You’ve been responsible and obtained insurance policies for important assets like your home and car. But what about all those limits on your policy coverage? Will they be enough to cover your costs after an accident? For certain types of coverage, an umbrella policy can give you extra protection beyond the limits of your other insurance. Read on to learn about umbrella insurance policies and how they can affect your existing coverage.
What Is Umbrella Insurance?
Whether you have homeowner’s insurance, car insurance, boat insurance, or all three, you probably have coverage for things like damage to your property, personal injury, and liability issues in case you’re sued for other people’s injuries or property damage. This last category – the liability insurance – is what an umbrella insurance policy can supplement. It can also provide coverage for things that may not be covered by your other insurance policies, such as vandalism, libel, slander, and invasion of privacy.
What Does Umbrella Insurance Cover?
An umbrella policy is optional insurance that extends the coverage of an underlying insurance policy. The types of coverage an umbrella policy may provide include the following:
- Lawsuit Defense: If someone sues you for personal injuries or property damage after an accident, an umbrella policy can help cover the legal costs of defending you in that lawsuit.
- Bodily Injury Liability: If you’re found legally liable for someone’s injuries, it may also cover those costs, such as their medical bills, lost wages, and pain and suffering. This can include injuries after a car accident and injuries someone incurs while visiting your home, among others.
- Property Damage Liability: An umbrella policy can help cover the costs of damage to someone else’s property caused during an accident for which you’re found legally liable.
- Libel, Slander, False Imprisonment: Umbrella insurance can also help cover the legal costs to defend you against claims of libel, slander, and false arrest. If you are found liable, the policy may also help cover the costs of the other party’s damages.
It’s also important to note what’s not typically covered by umbrella insurance. For example, the costs of your own injuries and property damage are not covered. Additionally, damages resulting from your intentional conduct or criminal activity are not likely to be covered.
Who Needs Umbrella Insurance?
Umbrella insurance can add extra security and peace of mind to anyone’s situation. However, it may be particularly useful for people who have a higher risk of being sued. This includes landlords and individuals who have a lot of assets or high net worth, because many people and insurance companies will look for the deep pockets when they’re searching for someone to sue.
Even if you don’t have a lot of assets and you have good coverage under your home, auto, or boat insurance, the costs of a lawsuit and the damages that follow can add up quickly and exceed what would otherwise seem like adequate coverage. If the costs of a lawsuit or damages exceed the limits on your insurance policy, you’ll have to pay for those costs out of pocket, putting all of your assets (such as your home, car, bank accounts, investments, retirement accounts, and future income) at risk.
The Insurance Company’s Obligations Under an Umbrella Policy
Under the contract of your insurance policy, your insurance company has certain obligations it must fulfill as long as you pay your premiums and abide by the terms of the policy. For example, once the liability limits on your underlying insurance plan have been exhausted, the insurance company must turn to the coverage of your umbrella policy and use that to pay for additional costs, up to the limits of your umbrella policy.
If an insurance company refuses to pay for your legitimate claim, acts in bad faith, or otherwise fails to abide by your state’s contract and insurance laws, you may be able to file a breach of contract or bad faith lawsuit. You can also contact your state’s insurance commissioner to file a complaint against the insurance company.
Get the Protection You Deserve Under Your Umbrella Insurance
After being extra cautious and obtaining umbrella insurance on top of your other insurance, the last thing you deserve is to have problems getting your policy to pay for what it’s supposed to cover. Whether you’ve just been notified of a lawsuit against you for injuries or property damage, or you’ve been dealing with an insurance company who refuses to pay for claims, contact an experienced insurance attorney today to get help obtaining the coverage you deserve.
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