What Is Umbrella Insurance and Do You Need It?

By the Mercury Team

Daily life can be full of uncertainty. Accidents happen and, without proper protection, can cause immense financial distress. You want the security of knowing that when the unexpected happens, you have safeguards in place to protect you. Personal umbrella insurance provides an extra layer of liability coverage* designed to help safeguard you from potentially devastating claims and lawsuits.

What Is Umbrella Insurance?

While you may not think twice about buying homeowners insurance or auto insurance, the liability limits provided may not be sufficient to protect your assets.

That’s where umbrella insurance comes in. An umbrella policy provides $1 million to $5 million in additional liability coverage. While the coverage is optional, it may protect you in an unfortunate accident.

For example, let’s say your auto insurance policy has $250,000 in liability coverage, but you’re in an accident where an individual has suffered severe injuries requiring hospitalization and you’re found to be at fault. Medical expenses can quickly escalate and when you factor in compensation for pain and suffering, loss of earnings, and future care, you may find your liability limits aren’t sufficient for the damages caused. If a suit was filed and a jury awarded the injured parties more than your policy limits, your savings and equity in your home could be at risk.

No one wants to find themselves in this situation. But how do you prepare for it? Umbrella insurance can provide the coverage needed for these losses.

What Does Umbrella Insurance Cover?

Here’s a rundown of what umbrella insurance typically covers:

• Bodily injury liability: This covers the cost of injuries to another person for whom you’re responsible. It could include medical bills, liability claims for injuries occurring on your property, or injuries caused by a serious auto accident where you’re at fault.
• Property damage liability: Umbrella insurance covers the cost of damage or loss to another person’s tangible property. This could include the expenses associated with auto accidents where you’re at fault, damaging someone else’s property with your vehicle, or incidents involving your pets or children causing damage to others’ property.
• Owners of rental units: If you own rental property, umbrella insurance can provide liability coverage beyond what your landlord insurance policy covers. This might include liability claims from someone tripping over a crack in the sidewalk of your rental property and suing you for damages.
• Certain lawsuits: Umbrella insurance can help protect you against certain lawsuits that may not be fully covered under other policies, such as slander, libel, invasion of privacy, false arrest, or malicious prosecution.
• Personal liability situations: Umbrella insurance can also cover situations that may not be related to your property or vehicle, like if someone gets injured on your property and decides to sue for damages.

What Is Not Covered by an Umbrella Policy?

What’s not covered can vary between policies, but generally, the following are not covered by an umbrella policy:

• Personal property damage: Damage to your own property is typically not covered under an umbrella policy. Your homeowners or renters insurance policy usually handles this type of coverage.
• Intentional or criminal acts: If you intentionally harm someone else or their property, or your actions are criminal, umbrella insurance will not cover those acts. This exclusion applies even if you’re sued for damages related to those acts.
• Written or oral contracts: Liabilities you assume under a contract are typically not covered.
• Business-related losses: Activities related to your business or professional services are typically not covered under a personal umbrella policy. In these situations, you may need a commercial umbrella policy or professional liability insurance.

How Much Does Umbrella Insurance Cost?

The cost of umbrella insurance can vary widely depending on several factors, including how much coverage you purchase, the insurance company you choose, your personal risk factors, and the underlying policy limits on your homeowners and auto insurance policies.

For an accurate quote, contact an insurance agent. They can provide you with a more precise estimate based on your specific circumstances and the amount of coverage you’re seeking.

When Does an Umbrella Policy Activate?

Umbrella insurance activates when damages from a covered claim exceed the limits in the underlying policy — everything from a lawsuit resulting from your dog biting the mailman to critical care for a driver you injure in an auto accident who’s hospitalized for months.

Don’t sacrifice peace of mind and protection over the possibility of a split-second accident that could result in a lifetime of financial stress. Speak to your agent today about adding umbrella insurance coverage to your policy.

Who Needs Umbrella Insurance?

You may need umbrella insurance if you have substantial assets — e.g., real estate, investment accounts, significant savings, etc. — that could be at risk in a lawsuit. Also, you might need it if you engage in activities that increase your liability risk beyond what your standard insurance policies cover. Examples may include having a swimming pool at home, owning a dog, or coaching kids’ sports. However, it’s always best to talk with an insurance agent to determine if an umbrella policy is right for you.

Conclusion

The purpose of an umbrella policy is to give you peace of mind, knowing you have a safety net that extends well beyond the limits of your current insurance coverage. If you need umbrella insurance, Mercury offers best-in-class coverage at an affordable price.

Contact us today for a fast, free quote!

*Not all coverages may be available in all states.