Umbrella Insurance – Is It Right For Me?

There is a funny old saying that “Only Americans would add flavor to their meat by adding more meat.” I am not sure if it is true, but we do have the bacon cheeseburger and filet mignon (which sounds French to me). Anyway, by the same thinking, it must have been an American who came up with the idea of “insuring your insurance.” We call this an umbrella insurance policy.

The purpose of an umbrella insurance policy is to add additional coverage to your existing insurances, or to fill in the gaps between types of insurance policies. It is also referred to as personal liability insurance. It can add coverage for large claims and lawsuits related to other insurances, like home or auto insurance. But it can also cover for lawsuits that go outside of your insured items. Is it worthwhile to carry this type of insurance? The answer is yes, but it would be YESS!!!!! If you fall into certain categories of risk, and we will talk about some of those here.

How does umbrella insurance work?

Let us create an example. We will suppose that a person comes to visit you in your personal residence. They slip and fall on the front step and end up with a compound fracture to their arm. This, of course would be a claim for your homeowners’ insurance. But suppose also that this person is a concert pianist. They are now unable to practice or work for the period of their recovery followed by therapy to restore their ability to play the piano at a professional level. And they make a lot of money. So they sue you for loss of work, and there are going to also be a lot of attorney’s fees. Your homeowner’s insurance maximums are drastically exceeded. It would have to come out of your own pocket and assets unless you have a personal liability policy to cover for the additional expenses and settlement.

I could create a lot of additional scenarios, and they could become really depressing. Just for example, have you ever written and posted a bad review on a restaurant or service provider? Did you realize that they could sue you for liability to their business? That type of lawsuit would not be covered by the regular insurances that people carry.

We will provide a list below that will identify some of these categories of high risk for you to help you evaluate your own situation.

What are the limitations?

As with all things, there are limitations or exclusions in an umbrella insurance policy. Many will seem obvious. Limitations include, your own injuries, damage to personal belongings, criminal or intentional acts, injuries or damage to property for other people where your business is liable, and contract liability associated with written agreements you enter into.

Still, personal liability insurance generally does cover injuries and property damage to others, personal attack lawsuits relating to slander and libel, legal defense costs, and injuries to tenants in your rental properties.

What are the categories of high risk?

All right, so here is a list of many of the high risk categories that might determine the likelihood of you having to use an umbrella insurance policy:

–Own properties, especially if this includes rental properties

–Own items that often lead to injury lawsuits, such as guns, dogs, trampolines, or pools

–Serve on a nonprofit board

–Host a lot of parties in your home

–Have a teenage or inexperienced driver

–Are a public figure

–Travel outside the U.S. frequently

–Have a large amount of personal assets

–Are involved with sports that could injure other people, or coach children’s sports

–Post reviews, including negative review of businesses or products

Were any of these surprises for you? If you have suddenly identified yourself as being a rather high risk person, it would be wise to consult with a professional, and to look at your personal assets to see what you could lose in these instances. There are additional complexities that will need to be addressed as well, such as whether your existing insurance policies meet the requirements to qualify you for an umbrella insurance policy.

To put a positive spin on this at the end with a rather silly statement: “You’re never caught in the rain if you have an umbrella.” There, didn’t that at least give you a little smile?

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i https://www.nerdwallet.com/blog/insurance/umbrella-insurance-complete-guide/ from the nerdwallet website.

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