Umbrella Insurance

I would like to discuss exactly what an umbrella policy is and give some insight as to whether you may need one to protect yourself.

An umbrella policy, which is also known as an excess liability policy, is a personal liability insurance policy that is in excess of other underlying insurance policies that you may have.    An umbrella policy can be thought of as a secondary insurance policy that pays when you have exhausted the limits on your primary insurance policies.

Certain underlying policies that you may have may include home, auto, boat, motorcycle, or rental property insurance.  Your umbrella policy will require you to have certain underlying limits on these policies to meet the requirement.  Most common underlying limits for auto liability would be $250,000/500,000/50,000 and $300,000 personal liability for property insurance.  Higher limits are usually required to lower the risk  of actually having to use your umbrella policy.

To further explain this in an example, we will look at an incident where you are being sued for $500,000 by an individual that you hit in an auto accident.  If the legal ruling favors that individual and you are required to pay $500,000 then $250,000 would be paid from your auto insurance policy under the max bodily injury liability limit.  The remaining $250,000 would be paid by your umbrella liability policy.

Determining the need for this type of liability policy is a decision that you will have to give some serious thought.  Most people with a minimal net worth may not feel the need to pay for this protection.  However, someone that has a considerable amount of equity in their home, business, or other assets may find it to be a very important tool to protect themselves and their assets.

Coverage afforded under this policy can include bodily injury or property damage due to your negligence or perceived negligence.  Also you can be covered against complaints of libel or slander.

How is an umbrella policy premium determined?

The following are some of the more common factors that go into determining a rate for an umbrella policy.

  • Driver age and driving history
  • Driver experience
  • Number of drivers
  • Number of properties
  • Number of other boats, motorcycles, ATV’s, etc.
  • Prior claims
  • Liability limits chosen

Please let us know if you have any questions or would like to be quoted for this valuable coverage.  Premiums can run as low as $150 per year and can provide you the protection you need living in today’s litigious society.

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