Insurance is a great way to help protect yourself financially from 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 precisely the way it sounds. The umbrella policy sits atop underlying insurance policies and provides an extra layer of liability coverage. 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 extra coverage not 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 essential 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 sued 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 an additional $500,000. If you don’t have an umbrella policy, the rest of the payment must come from your assets, such as selling your home or tapping your retirement savings. However, if you have an umbrella policy (Standard limit is $1,000,000), the umbrella will come 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 travelling 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 restaurant proprietor 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 when 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 ensure you have enough liability coverage to protect your financial security. It’s essential 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 traveller (even on short business trips)
As sensibly as we might go about our 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 increasingly expensive.
Where can you buy personal umbrella insurance?
If you already have a home/tenant insurance policy, you can contact one of our licensed isure brokers and ask about umbrella coverage. You’ll likely need umbrella coverage from the same insurer that 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 protect above and beyond your existing policies. Most insurers will require you to buy a regular insurance policy before purchasing an umbrella policy. If 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. Certain limits usually must be met 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 on your homeowner’s policy before selling you an umbrella liability policy for $1 million 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 injuries or damages to your home, car, or property. Personal umbrella insurance also will not cover intentional acts of criminal behaviour. Additionally, it doesn’t cover damage caused during business activities or by 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 with 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’d like to add an umbrella policy to your existing one, contact one of our isure brokers today.
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