If you’re sued for a lot of money, your assets – including your house, car, and retirement accounts, and even future income may be at risk. Umbrella insurance is a type of liability insurance that provides extra coverage on top of your existing insurance policies such as homeowners and auto. It comes into play in two scenarios:
First, when a lawsuit or event exceeds the limits on your primary policy.
Second, when you need coverage for something not in your existing policies, such as someone suing you for libel, slander, false arrest, or a personal injury that occurs on your property or rental property.
Umbrella insurance protects your assets from major claims. For example, if you’re at fault in a serious car accident and the occupants of the other vehicle sustain $500,000 in injuries and lost wages. Your policy only covers $300,000. Normally, you’d personally be on the hook for the rest, but if you have an umbrella policy, you’re covered.
Key types of coverage provided by an umbrella policy include:
Bodily Injury: Covers medical bills and liability claims associated with damage to another person’s body. This includes things like “slip and fall” injuries in your home, dog bites, auto accidents where you’re at fault.
Property Damage: Covers the cost of damage to someone else’s property. For example, if you (or one of your dependents) crash into a building and the damage exceeds your auto policy limits, an umbrella policy could spare you a big bill.
Rental Property: Helps cover incidents related to your rental property, such as injuries suffered by a tenant or a tenant’s dog biting someone.
Lawsuits: Provides coverage for legal fees if you’re sued for libel, slander or face malicious prosecution or false imprisonment and some other legal situations.
Umbrella policies are usually sold in a million dollar increments ranging from one to five million dollars in coverage.