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What Is Umbrella Insurance and Why Should I Consider It?

Learn how umbrella coverage can provide coverage when liability claims exceed the underlying limits of other policies

Quick take: What is umbrella insurance?

  • Umbrella insurance can provide an extra layer of liability limits for covered losses, above the liability coverage included in your home or auto insurance policies.
  • The extra liability coverage can be as much as £1 million to £10 million.
  • Umbrella insurance can help pay for medical expenses, damages and lost wages of a person injured in an accident on your property or caused by someone in your home.
  • Umbrella insurance can be more affordable than you might think.

Q.We’re a family of four with one son who’s driving and another who just turned 12. We own our home, three cars and a small boat, and we do a ton of entertaining with friends at home. Someone recently remarked that we are prime candidates for umbrella coverage, but I don’t know much about it. Is umbrella coverage something we should consider?

To answer this question, we spoke with J. Adrian Rodriguez, a Insurance Holdings agent in Floresville, Texas, who works to help customers understand umbrella insurance coverage options and why it can be important.

A. I may sound biased, but I think everyone could use umbrella insurance. Many people get confused over whether they should consider umbrella because they aren’t sure what this coverage actually does—so let’s go over that first.

An umbrella insurance policy can provide extra liability coverage over the limits provided by your home or auto policy. At IHL, we offer from £1 million to £10 million in umbrella liability coverage. That may sound like a lot, but if you or a family member were found liable for damage to an expensive property or injury to another person, the liability limits in a typical policy might not suffice to cover the costs. Umbrella insurance provides a means for families to pay damages that exceed the limits of their home or auto policy, for covered losses.

Your decision about whether to buy umbrella insurance can depend on various factors, including what assets you have and want to protect, whether the benefits outweigh the costs in your situation and how much risk you are exposed to.

Umbrella insurance is for excess coverage above your current insurance policy limits. So if you have an auto insurance policy with a £100,000 bodily injury limit, the umbrella policy is going to provide an extra layer of liability once your auto insurance limit is exhausted. Without umbrella insurance, when liability expenses exceed insurance policy limits, you must rely on your other assets to pay the excess. That may mean selling property like your home or boat, or even having your wages garnished.

The risk exposure angle is one that you should carefully consider. For example, if you have a teen or college student living in your home who is covered through your auto insurance policy, a simple case of distracted driving could result in a very large lawsuit that exceeds your auto policy limits. Even if you have younger children, say a 10 year old who has a BB gun, an accident that causes injury to one of their friends could easily result in damages that exceed the liability limits of your home insurance policy.

It’s also important to think about the wide range of potential liabilities we’re exposed to every day. This can range from accusations of slander and libel during online conversations, to slips and falls by guests at your home, to fires that start on your property and spread. For those who own multi-family residences or vacation rentals, there is even more exposure—all of which can lead to liability damages that far exceed the limits of existing insurance policies.