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Umbrella Insurance

Finding the Best Umbrella Insurance for You

Because everyone could use extra liability protection

Umbrella Insurance

Your homeowners, business, or auto insurance provides critical legal protection, but in certain cases, it might not be enough. Having a particularly costly lawsuit gets filed against you could easily put you in need of extra coverage. Fortunately umbrella insurance is designed to provide this important protection.

Even better, an independent insurance agent can help you get set up with all the umbrella coverage you need. They’ll help you anticipate your legal risks ahead of time and get you equipped with the right protection to leave you feeling secure. But first, here’s a closer look at this important coverage.

What Is Umbrella Insurance?

Umbrella insurance, also called excess liability coverage, is a separate insurance policy that acts as a liability “umbrella” by extending over an underlying insurance policy, such as your business, auto, home, motorcycle, and boat policies. It’s a liability-only policy, meaning there is no physical damage coverage for anything. It simply extends your liability limits if they get exhausted by your underlying policy on a large claim.

Most insurance companies offer umbrellas in million dollar increments, often starting at $1 million and ending at $5 million. Some companies might offer a lower limit, such as $500,000, while you’ll probably have to go through a very large insurance company to get limits higher than $5 million. An independent insurance agent can help you find the right umbrella coverage for you, whether that be a personal or business policy.

Who Sells Umbrella Insurance?

Umbrella insurance is available from many different insurance companies, and the best way to find the right carrier for you is through working with an independent insurance agent. 

While many insurance companies could create an umbrella insurance policy for you, finding coverage could also depend on the area you live in. Here are just a few of our top picks:

Umbrella Insurance Companies Star Rating
GEICO
Progressive
5 star rating
Allstate
RLI Corp.
Liberty Mutual
5 star rating
USAA
5 star rating
Chubb
5 star rating
Travelers
5 star rating

One umbrella insurance company outshines its competitors:

Liberty Mutual has been in the insurance industry since 1912, and is rated "A+" by the Better Business Bureau and "A" by A.M. Best. This Fortune 500 company also offers some one of the best umbrella insurance products available on the market. Liberty Mutual offers personal umbrella policies with $1 million limits to be paired with home, auto, or recreational vehicle insurance. 

The carrier's business umbrella policies come with up to $35 million limits to be added to your general liability insurance, as well as up to $25 million in coverage over the top of another carrier's primary liability policies. An independent insurance agent can help you determine if Liberty Mutual is the right insurance company for you.

What's the Difference between Personal and Business Umbrella Insurance?

Personal umbrella insurance is designed for individuals to add to their home, auto, motorcycle, or boat insurance. Business umbrella insurance is designed for companies to add onto their business insurance. Personal umbrella policies protect home and auto owners against large costs stemming from lawsuits filed against them for property damage or bodily injury.

Business umbrella insurance operates very similarly, by offering additional liability protection against large lawsuits for claims of property damage or bodily injury caused by your business. While you can own both personal and business umbrella policies, you cannot use one type of umbrella coverage to protect you in another area. So, if you've got a business, you can't use your personal umbrella insurance to help protect you against lawsuits there, and vice versa.

How Does Umbrella Insurance Work?

Umbrella insurance covers  of lawsuits, settlements, and legal defense for cases that you’re involved in, as long as the reason for the lawsuit is covered in the policy. However, umbrella insurance sometimes even covers certain types of lawsuits that aren't covered by an underlying policy, like homeowners, business, or auto insurance.

Here's a breakdown of umbrella coverage on top of an auto insurance policy:

Umbrella Coverage Amount Graph

So, if you had an auto insurance policy that provided $300,000 in liability coverage and then added a $1 million umbrella policy, you'd have increased your liability protection to $1.3 million total. Umbrella policies tend to be highly affordable, especially considering the generous amount of added protection they offer. An independent insurance agent can help you find the best policy for you.

What Does Umbrella Insurance Cover?

An umbrella policy is designed to extend liability protection included in other types of insurance. Personal umbrella policies are most commonly paired with homeowners insurance, auto insurance, or watercraft insurance, and business umbrella policies are paired with general liability coverage under business insurance or commercial auto insurance.

Umbrella insurance usually covers: Umbrella insurance usually doesn't cover:
Others' treatment for injury and funeral costs Your own injuries
Others' property damage Damage to your personal belongings
Lawsuits involving slander, libel, defamation of character and other personal attacks Others' injuries or property damage that your business is liable for
Your legal defense costs Intentional or criminal acts

Umbrella insurance covers the following:

  • Extremely costly lawsuits: Umbrella insurance provides a buffer against extra legal fees that go beyond the limit provided by your homeowners, auto, watercraft, or business insurance policy. Just one lawsuit could easily wipe out your built-in liability coverage, so having umbrella insurance can be critical.
  • Global coverage territory: Homeowners, auto and other insurance policies come with coverage territory limits. Basically, your coverage is restricted to certain areas. Many standard policies cover mishaps in the US, Canada, or Puerto Rico. Outside of these locations, you won’t be covered. But an umbrella policy extends this important coverage worldwide.

Just as a regular umbrella protects you against harsh weather, umbrella insurance protects you against harsh legal consequences. An independent insurance agent can help you decide if umbrella coverage is a good choice for you.

What's Not Covered by Umbrella Insurance?

Umbrella policies aren’t standard across the country. This means your policy could look quite a bit different from your neighbor's. However, there are a couple of common exclusions in umbrella policies, like:

  • Certain out-of-pocket expenses: Umbrella policies come with a “self-insured retention,” which is the amount the policyholder must pay if a claim is not covered by their underlying policy, like their homeowners or auto insurance. If a claim was covered by your umbrella insurance but not your auto insurance, you’d have to pay this amount, often $1,000, before your umbrella coverage would kick in to cover the rest.
  • Non-liability related disasters: There are many costly disasters that could easily exhaust other coverage limits under your homeowners, auto, business, or watercraft policies. Umbrella insurance, however, is only designed to cover excess legal fees. So umbrella coverage won’t protect you against property damage claims that exceed your homeowners insurance’s limit.
  • Your own injuries: Umbrella policies do not cover your personal injuries, regardless of which policy they're paired with. You'd need health insurance for that.

Umbrella insurance also doesn't protect against liabilities you assume under a contract. If you’re concerned about not having enough coverage in other areas under your homeowners, business, auto, or watercraft insurance, your independent insurance agent can help you extend your protection where desired.

Do I Need Umbrella Insurance?

Umbrella Insurance Pros: Umbrella Insurance Cons:
Provides extra liability coverage and legal defense costs once the limits of your auto, home or other insurance, such as boat or motorcycle, have been exhausted.   You must buy a minimum amount of auto and/or property insurance liability coverage before you can add umbrella coverage.
Covers incidents that your main insurance might not, such as libel and slander. You must already carry auto or property insurance, usually homeowners, to qualify.

You’d need an umbrella policy to protect yourself against unforeseen, expensive legal troubles. A couple of common examples of scenarios in which umbrella insurance can be critical include:

  • Car accidents: Whether you hurt someone else with your vehicle or damage their property, lawsuits following car accidents can get pricey, fast.
  • Dog bites: Believe it or not, dog bites can be some of the most expensive legal claims filed against homeowners. The average cost of dog bite claims in 2019 was $44,760.
  • Guest or customer injuries: Slips and falls on floors, stairs, and sidewalks are another common, costly lawsuit filed against homeowners and businesses. Without additional liability protection, you could be in even more trouble.

An independent insurance agent can provide even more examples of when having a personal or business umbrella policy would make sense for you, and provide additional specific scenarios in which having coverage could make all the difference.

How Much Does an Umbrella Policy Cost? 

Most insurance companies offer $1 million umbrella policies for between $150 and $300 per year. For an additional million dollars in coverage, you'd add about $75 to your annual premium, and another $50 per year for each additional increment of $1 million.

Umbrella insurance premiums are affected by your specific risk exposures, and may be higher due to several factors, including:

  • If you own any rental properties or second homes
  • If you own more than two vehicles
  • If you own a boat, motorcycle, camper, or ATV
  • If you've had any driving accidents or violations in the last three to five years

An independent insurance agent can help you address any concerns you may have about the price of umbrella coverage for you, as well as look for applicable discounts in your area. They'll get you set up with the most affordable coverage possible.

Key Points about Umbrella Insurance

Umbrella insurance offers crucial protection for homeowners, business owners, and more. Here are some key points to keep in mind about umbrella coverage:

  • Umbrella coverage extends your existing liability coverage limits provided by several types of policies, including home insurance, auto insurance, and general liability insurance for businesses.
  • Umbrella coverage can reimburse for medical treatment of injuries to guests or customers.
  • Umbrella coverage is beneficial to folks who own a lot of valuable property, as well as those with numerous, potentially expensive, legal exposures.
  • Umbrella coverage can benefit business owners, high net worth homeowners, and high-risk workers like lawyers.
  • Umbrella coverage is liability-only and does not reimburse for any type of property damage.

Once you understand the basics of umbrella insurance, it's easy to see how this coverage can be critical for individuals and businesses alike.

Frequently Asked Questions about Umbrella Insurance

What is business umbrella insurance compared to personal umbrella insurance? What’s the difference? 
Personal umbrella insurance is designed to be paired with policies such as home, auto, or boat insurance, while business or commercial umbrella insurance gets paired with the general liability or commercial auto portion of business insurance. Coverage will benefit either an individual or a business.
How much umbrella insurance is enough? 
To determine how much umbrella insurance you need, you'll want to work with an independent insurance agent. Many folks find the standard $1 million in additional liability coverage provided by umbrella policies is more than enough, while others will require much more.
Will umbrella insurance cover natural disasters? 
No. Umbrella insurance only offers excess liability protection, it does not cover property damage.
How does umbrella insurance work?  
When you file a claim, your insurance company hires a lawyer to defend your case and negotiate any settlements. You'll get reimbursed accordingly.
Will umbrella insurance cover landlords and rental properties? 
Yes, umbrella insurance can be paired with rental property insurance for landlords. 
Will umbrella insurance cover my most important assets by itself?
That depends. Umbrella coverage increases liability coverage limits, but if your assets are damaged by other causes, such as fire, vandalism, or floods, you'll need separate coverages. An independent insurance agent can recommend any additional coverages you need to protect your assets in additional to umbrella coverage.
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The Benefits of an Independent Insurance Agent

Independent insurance agents are kind of like the Google of insurance quotes. You tell them what you’re looking for, and they bring in the results. And since they aren’t tied down to one carrier, they’re free to shop around and bring multiple policy options to the table. 

And it gets better. You don’t have to review the policy options alone. They’ll walk you through everything you need to know about finding the right coverage, and price, for you. 

But it doesn’t end with your signature. Along the way, if something bad ever happens, they’ll handle the entire claim process for you and deal with the carrier, so you can focus on more important things in your home or business.

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TrustedChoice.com Article | Reviewed by Paul Martin

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