Having insurance is a great way to help protect yourself financially from all kinds of unwelcome surprises. While there’s a lot that insurance can do, you may be looking for an extra layer of protection. That’s where personal umbrella insurance comes into the picture. An umbrella insurance policy allows you to extend your third-party liability coverage beyond the limits in your existing insurance policies.
What is personal umbrella insurance?
A personal umbrella insurance policy works exactly the way it sounds. The umbrella policy sits over the top of underlying insurance policies and provides you an extra layer of liability insurance. In the case of a personal umbrella policy, underlying policies would include auto, homeowners, boat and rental property insurance. If your limit of liability is used up on your underlying policy, then the umbrella kicks in with additional coverage. An umbrella policy may also provide you with additional coverage that isn’t already included in your home or auto policy. Protection, for example, in the event of false arrest, slander, or an invasion of your right to privacy would be covered under an umbrella policy. Umbrella insurance policies are an important part of every insurance program—let us explain why.
How it works
Let’s use the example of a car accident where you severely injure another driver. They decide to sue you for $1,000,000, to cover lost wages and medical expenses. Your auto insurance has a limit of $500,000. So, after your auto insurance pays out, you are still obligated to pay for an additional $500,000. If you don’t have an umbrella policy, the rest of the payment would have to come from your assets, like selling your home, retirement savings, etc. However, if you do have an umbrella policy (Standard limit is $1,000,000), the umbrella will come in into effect after your standard liability coverage has run out.
Why do I need personal umbrella insurance?
Personal umbrella insurance is not necessarily a priority for everyone. This versatile coverage can prove indispensable if you’re engaging in:
- “High-risk” activities (like operating a motorboat)
- Driving in the USA or traveling abroad, you will need enhanced liability insurance
- A potential hazard on your property (like a swimming pool) that could be the site of a catastrophic injury
- Social media. Personal umbrella coverage protects against libel, slander and breach of privacy. Whether it’s the proprietor of a restaurant who receives an awful review or the parent of a child whose photos are shared, libel suits are on the rise.
- Auto accidents are so common that it’s smart to have this coverage. Base policy limits are relatively low considering the potential damages – especially if any of the victims experience loss of future income or require long-term care
- Hosting events. Small get-togethers involving close friends and family appear low-risk at first glance. However, unpredictability increases when you add variables, like alcohol, pets or small children. We hope our loved ones wouldn’t sue, but in cases compensation is needed, the decision to pursue legal action becomes less personal and more about necessity.
Who should purchase a personal umbrella policy?
An umbrella policy is a relatively inexpensive way to make sure you have enough liability coverage to protect your financial security. It’s important to consider purchasing umbrella coverage if you have expensive assets or investments you want to protect. Also, it is a good investment if you participate in any activities that could increase your chances of being sued:
- Coaching kids’ sports teams
- Participating in sports where you could injure others
- Active in your community i.e. doing volunteer work
- Travel a lot
- Have pets
- Use social media
- Own rental properties
- An owner of a recreational property (like a cottage), rental property, boat, or snowmobile
- A volunteer for school field trips or outings with your children’s friends
- A frequent traveler (even on short business trips)
As sensibly as we might go about our own lives, other people’s actions can be unpredictable. Anyone can benefit from an umbrella policy—it’s impossible to predict an accident that might result in a lawsuit, and lawsuits are becoming more and more expensive.
Where can you buy personal umbrella insurance?
If you already have a home/tenant insurance policy, contact one of our licensed isure brokers and ask about umbrella coverage. You’ll likely need to buy umbrella coverage from the same insurer who provides your home insurance. Most insurers won’t sell you an umbrella policy if you bought your standard coverage from another company.
Can you buy an umbrella policy if you don’t already have liability coverage?
Umbrella coverage is designed to provide you coverage above and beyond the coverage in your existing policies. Most insurers will require you to buy a regular insurance policy before you can purchase an umbrella policy. In the event that you’re sued, your umbrella policy won’t kick in until coverage in your other policies runs out.
What is the cost of an umbrella insurance policy?
For approximately $150 to $300 per year, you can buy a $1 million personal umbrella liability policy. The next million will cost about $75, and $50 for every million after that. Personal umbrella policies go into effect after your underlying coverage is exhausted. There are certain limits that usually must be met in order for you to purchase this coverage.
Most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 your homeowner’s policy before selling you an umbrella liability policy for $1 million of additional coverage.
Can I buy umbrella insurance separately?
Stand-alone umbrella insurance is a policy that offers coverage if you use a separate provider for your home or auto insurance. However, stand-alone umbrella coverage is not very common and is not offered by any major insurers.
Does an umbrella policy help cover me?
An umbrella insurance policy does not cover your own injuries or damages to your own home, car or property. Personal umbrella insurance also will not cover intentional acts of criminal behaviour. Additionally, it doesn’t cover damage caused while performing business activities or from certain breeds of dogs or types of vehicles.
Is an umbrella policy a waste of money?
An umbrella policy is not a waste of money if you have more than $500,000 in assets. Umbrella policies can provide you liability coverage beyond the limits of your other insurance policies. Even if you never file an umbrella claim, the added financial protection is usually worth the low cost of coverage.
If you are interested in adding an umbrella policy to your existing policy, contact one of our isure brokers today.
