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Umbrella Insurance Policies

You've been responsible. You purchased property insurance and casualty insurance. You purchased liability protection to cover your assets. But what about your coverage limits? Will the policy limits cover your personal liability? A personal umbrella insurance policy could be the answer.

Umbrella insurance works to provide extra protection beyond the limits of your underlying policies. Read on to learn about umbrella insurance policies and how they impact coverage.

What Is Umbrella Insurance?

Umbrella insurance protects your savings and other assets. You may have homeowner's insurancecar insuranceboat insurance, or all three. You probably even have coverage for personal property, personal injury, and other liability issues.

Umbrella coverage supplements liability insurance. You're responsible for damages over the liability limits of your car insurance, homeowners insurance, watercraft insurance, or other policies. It can provide extra liability coverage for things that other insurance policies may not cover. This includes liability coverage for the following:

  • Defamation of character
  • Vandalism
  • Libel
  • Slander
  • Invasion of privacy

An umbrella policy can satisfy liability claims if someone sues you for damage above your liability policy limits. It can also fund defense costs. Umbrella insurance is similar but not identical to excess liability insurance. Excess liability insurance provides higher limits on the coverage you already have.

Who Needs Umbrella Insurance?

Umbrella insurance can add security and peace of mind to anyone's situation. However, it may benefit people with a higher risk of being sued.

This includes landlords with rental property and individuals with many assets or high net worth. Individuals and insurance companies look for deep pockets when making a claim or lawsuit.

Even if you're of modest means and have coverage under your home, auto, or boat insurance, additional liability coverage is helpful. The costs of a lawsuit and the damages that follow can add up quickly.

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. This puts your assets (such as your home, car, bank accounts, investments, retirement accounts, and future income) at risk.

What Does Umbrella Insurance Cover?

An umbrella policy is optional insurance. It extends the coverage of an underlying insurance policy. Liability insurance protects you financially in a lawsuit or claim against you. It pays to defend you in the action. It's a standard part of most homeowners policies, auto insurance, renters insurance, and condo insurance policies. 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. It can cover the legal costs of defending you in that lawsuit. It would also pay the damages.
  • Bodily Injury Liability: It may also cover those costs if you're found legally liable for someone's injuries. These costs may include medical bills, lost wages, and pain and suffering. This would also include injuries after a car accident and injuries someone incurs while visiting your home.
  • 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. It would cover legal fees as well.
  • Libel, SlanderFalse Imprisonment: Umbrella insurance can also help cover the legal costs to defend you against libel, slander, and false arrest claims. If you are found liable, the policy may also help cover the costs of the other party's damages.

Umbrella policies usually cover associated legal costs beyond your liability limit. It's also important to note typical exclusions from umbrella insurance. For example, the costs of your injuries and damage to your own property are not covered. Additionally, damages resulting from your intentional conduct or criminal activity will not likely be covered. Nor will it cover business liability unless you purchase a business umbrella policy.

Selecting Umbrella Insurance Coverage

Having adequate personal liability coverage is a critical part of any comprehensive plan. Choosing the level of umbrella insurance coverage is a crucial decision.

Your insurance agent can explain the particulars of your policy. For example, you may need to pay a retained limit, similar to a deductible. Following payment of any retained limit, umbrella coverage comes into play. A licensed insurance agent can provide an umbrella insurance quote and review umbrella insurance costs for the selected policy.

The Insurance Company's Obligations Under an Umbrella Policy

Under the contract of your insurance policy, your insurance company has certain obligations. You pay your premiums and abide by the terms of the policy. That's your obligation.

Once the liability limits on your underlying insurance plan have been exhausted, the insurance company turns to your umbrella policy. Umbrella coverage pays additional costs up to your umbrella policy insurance limits.

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

You were prudent and obtained umbrella insurance on top of your other insurance. Your other policies may include home insurance, an auto insurance policy, and life insurance. The last thing you want is additional financial exposure. That's why you purchased an umbrella policy in the first place.

Have you just been notified of a lawsuit against you for injuries or property damage? Have you been dealing with an insurance company that refuses to pay for claims? If so, contact an experienced insurance attorney in your area today. They can help you obtain the coverage you deserve.

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