Some insureds need more extensive liability coverage than can be provided by personal lines policies. This need can be met through an umbrella policy which has two important purposes.
1. Provide additional liability insurance over and above the basic coverage provided by underlying liability insurance.
2. Cover some losses excluded by the underlying liability insurance.
(Coverage limits for a personal umbrella policy range from $1 million to $5 million)
Excess Liability Coverage
Let’s see how a personal umbrella provides excess liability coverage. Let’s assume you invited a friend over to your house and he trips over your kid’s toys and injures himself. His medical expenses total $150,000 and your home insurance covers only $75,000 for liability coverages. After your home insurance liability maxes out, the umbrella kicks in (if you have it attached with your home insurance policy). The umbrella policy will pay the other $75,000 so it doesn’t come out of your pocket.
Same thing applies for auto insurance. If you have an umbrella policy attached to your auto insurance and someone gets injured in an accident because of your negligence, your auto insurance liability will cover its maximum amount possible and then the umbrella policy will take care of the rest.
(NOTE: The insured must identify any underlying liability insurance to the insurer before an umbrella policy is issued.)
Coverage for Excluded Losses
A personal umbrella may also cover losses that are excluded by the underlying policy. For this type of coverage, the insured must select a retention limit. Retention limits work like deductibles because they represent the amount of loss the insured must cover out of pocket.
Umbrella policies prices vary depending on the person. Factors such as how many cars you own, family members, age and among other things count so call your local agent to find out if an umbrella policy is right for you. You can also give us a call at 860 684 2721 or visit our website for a quote.