Do I Really Need an Umbrella Policy?
You have homeowners insurance. You have auto insurance. You may even have boat insurance. That means all of your bases are covered, right? Maybe not…
Like many things in this life the question cannot really be answered unless we look at who is asking the question. Let me ask you a couple of questions.
- Do you own your home?
- Do you own two or more cars?
- Do you have a boat or jet skis?
- Do you have a recreational vehicle?
- Do you own a business?
- Do you own rentals?
- Do you car pool for work, or run your kids or someone else’s kids to school, scouts, sports etc.?
- Do you have a teen driver?
- Are you a gun owner?
- Will you continue to earn a wage over the next 5 to 10 years?
- Is your total net worth over $500,000?
If you can answer two of the above questions with a yes answer, you need an umbrella policy.
What Does Umbrella Insurance Cover?
True Umbrella coverage is ideal for both individuals and families. Not only does it provide an added layer of protection, but often times it also covers gaps in your primary insurance policy.
The following coverages are provided by Umbrella Liability Insurance:
- Bodily Injury Liability – Provides coverage for damages to another person’s body.
- Personal Injury Coverage – Covers the costs of mental anguish attributed to slander, libel, false arrest, defamation of character.
- Property Damage Liability – Pays for the costs associated with another person’s property damage or loss.
- Landlord Liability – As the owner of a rental property, you are at risk for lawsuits stemming from a number of potential incidents. Umbrella Insurance can help to ensure you are covered beyond your primary landlord insurance policy.
What Is An Umbrella Policy?
Umbrella policies cover your liability over the liability limits on your other insurance policies. If you carry $300,000.00 liability limits on your auto insurance and you are in an auto accident and you get sued for $500,000.00 an umbrella policy would pick up the $200,000.00 difference. Why is that important? Do you really want to have to sell your house or have your future earnings garnished until your lawsuit debt is paid off? No, you don’t. No one wants that.
You need to ask a lot of questions when you buy an “Umbrella” policy. Many insurers only sell a follow form Excess Liability policy. An Excess Liability policy is not an Umbrella policy. Excess Liability forms provide you with less coverage than the traditional Umbrella policy. By the way, insurers know you won’t know the difference. They are more than happy to protect themselves from potential losses versus covering your liability exposures.
What Is The Difference Between Follow Form Excess Liability and an Umbrella Policy?
Both policies will give you additional liability limits above your current policies. A Follow Form Excess Liability form is just what it says it is. It will provide you additional liability coverage over the primary insurance coverages you currently have, in short it will follow the current primary insurance form. If you have an auto insurance policy and your liability limits are $500,000 and you buy a $1,000,000 Excess Liability policy. You will have 1,500,000 in liability coverage. The same would hold true for your homeowner’s insurance.
If you do not own a boat and you go to the lake and decide to rent a boat and you get in a boating accident your Excess Liability Coverage will not cover you because you did not have boat policy for it to follow. You did not own a boat, so you would not have bought a boater’s insurance policy.
Spoiler Alert: If you had purchased an Umbrella policy for $1,000,000 and you had the same boat accident your Umbrella policy would act as your primary liability coverage even though you did not have a boat policy at the time. Umbrella policies do not need to follow a form. This will follow through if you rent a motor home for vacation with the family, a skidoo, a motorcycle, on and on.
Umbrella policies will also cover you for libel and slander. In the day of social media this is a common occurrence. Your teenager gets angry at the kid next door and starts a rumor that the neighbor sells drugs and alcohol to the neighborhood kids. After the police officers come you your neighbor’s house to investigate and he finds out your kid put this lie out on social media he may want to sue you for Libel and Slander because he got fired from his job as a school administrator due to this lie. Your Umbrella will pay his lost wages, due to the wrongful termination and pain and suffering because his reputation was tarnished. No follow form Excess Policy will provide this type of coverage.
What to Ask Your Agent When You Buy an Umbrella Policy.
- If I rent a boat on a family vacation will I be covered for Liability if I hurt someone while driving a rental boat?
- What if I threw a party and one of my guests had too much to drink and on his way home he had an auto accident and killed someone because he was driving drunk– would I be covered for the liquor law liability lawsuit?
- If my son got into a fight at school and seriously injured another kid and his parents sued me for his medical bills, counseling, and tutoring would I be covered.
- If at my rental my tenants had friends over and someone tripped and slipped on the ice at my rental would my Umbrella cover me.
A no, on any one of these questions, means the agent is selling you a follow form Excess Liability Policy. If you need an Umbrella policy look for another insurer who can sell you an Umbrella policy. In our office we have two insurers who sell Umbrella policies the rest of our carriers only sell follow form Excess Liability policies. There is a difference between the two policies and they cost about the same. If you are going to spend the money buy an Umbrella Policy and get the extended coverage for the same price.
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As you can see, our protection team understands the way home insurance works. Let us identify the kind of policy and coverage you need when obtaining premium quotations to find the best values.
10 Real Examples Of Umbrella Insurance Claims
Example Claim 1: An insured’s son slid through an intersection on icy roads and hit an elderly woman crossing the street. The elderly woman was hospitalized with multiple injuries. The insured’s personal umbrella policy limit was paid in full.
Example Claim 2: An insured permitted several of her children and their friends to play paintball in her large back yard. The children were advised of all safety precautions including to use face and neck protection at all times. A paintball participant removed her headgear as she was leaving the field and was struck in the eye with a paintball. The claim was settled for more than $475,000.
Example Claim 3: A babysitter was watching 2 young children over summer break. A small wading pool was set up in the family’s backyard. The babysitter made sure neither of the children was near the pool and went inside to answer the phone. When she came out of the house one of the children had drowned in the small pool of water. The court awarded the child’s parents around $11,000,000.
Example Claim 4: An insured’s son had a friend over for a play date. The kids were playing with the family dog. The family dog bit the son’s friend in the face resulting in multiple reconstructive surgeries. The injured child’s parents settled for roughly $10,000,000.
Example Claim 5: A couple hosted a birthday party for their teenage child. They did not provide any alcohol, but some guests of the teenager brought some to the party. Leaving the party one of the guests was severely injured in an auto accident. The accident was credited to his consumption of alcohol at the insured’s home. Luckily the homeowners had Umbrella Insurance which responded to this claim.
Example Claim 6: The insured’s tenant claims she lost her track scholarship to a four-year college when she became ill and lost part of her lung capacity due to Stachybotrys black mold found in her apartment. The tenant claimed permanent lung damage and demanded over $750,000.
Example Claim 7: The insured was driving on the highway when she accidentally drifted over the center line hitting the oncoming car. The insured was at fault and her auto insurance liability limits did not cover the entire claim amount. Because the insured did not have a home or other assets her future wages were garnished for 10 years to settle the claim.
Example Claim 8: The insureds teen was off to prom. To get a large group picture the insured asked all of the teens at his home to stand on the porch balcony. Just as the photo session was ending the balcony collapsed injuring multiple prom-goers as they fell 10ft to the ground. Each injured student demanded settlement to the insureds umbrella limit.
Example Claim 9: The insured’s daughter had a sports coach. The daughter did not like the coach and made several “judgmental” and false remarks about the sports coach online. The coach sued the parents for personal injury and was paid more than $750,000.
Example Claim 10: The insureds 18-year-old son was driving the family boat on the lake. He did not see the swimmer in the water, hitting and severely injuring the swimmer. The climate received just under $1million dollars.
THE ABOVE EXAMPLES ARE ALL REAL LIFE CLAIMS THAT COULD HAPPEN TO EVEN THE MOST CAREFUL OF PEOPLE. AS YOU CAN SEE YOUR LIABILITY LIMITS CAN QUICKLY BE EXHAUSTED.
FOR LESS THAN THE COST OF YOUR LUNCH, MOST PEOPLE CAN PURCHASE A PERSONAL UMBRELLA POLICY WITH A LIMIT OR $1,000,000, $2,000,000, $5,000,000 AND EVEN $10,000,000.
* All of these illustrations are based on real events. The numbers are based on a sliding scale and can vary greatly.