FAQs About Umbrella Insurance
You may have heard of a personal umbrella policy, but do you know what it does? Researching insurance can be challenging! As you read through options and policy details, you can often think of another question for every answer you find. Here are the 30 most frequently asked questions about Umbrella Insurance.
- What is Umbrella Insurance?
An umbrella insurance policy is an extra layer of liability insurance that extends beyond the coverage limits of your personal liability coverage or the liability coverage limits of your auto and home insurance policies. Umbrella insurance is designed to pick up where your other policies leave off and protect your assets.
- What does an umbrella policy cover?
Umbrella insurance covers defense costs, judgments and court costs in the event you’re sued, and protects against liability related to non-bodily and bodily injuries. An umbrella policy typically covers the following:
- Personal injury
- Bodily injury to others
- Property damage
- Slander
- Defamation
- Libel
- Invasion of privacy
- Defense costs
- Legal settlements
- Wrongful eviction
- Wrongful entry
- What does it NOT cover?
Umbrella insurance does not cover damage to your own property, nor does it cover any deliberate damage to others’ property caused by anyone on the policy.
- How Does Umbrella Insurance Work?
Your umbrella insurance can come into play if you are found liable and need to pay damages, or if you are sued and need to pay for your legal defense – even if the result is that you are not found to be responsible. An umbrella policy only pays once your basic liability limits have been exhausted or the claim is excluded from the basic liability coverage.
- Do I have to have an existing policy with an insurance company to get umbrella?
While the exact requirements for coverage will vary from company to company, you typically have to have some sort of existing coverage with a carrier before they will write an umbrella policy. There are options within Onyx Insurance to provide an umbrella policy without any supporting coverage.
In some cases, they may require that you have both a home and auto policy, but it is also possible that they will only require one or the other. However, regardless of which type of policy they require, you must purchase the amount of liability required by the company guidelines to qualify for the umbrella.
- How do you know if you need it?
You might need an umbrella policy if you: own a car, own a home, want to protect your assets against a lawsuit or judgment, or want to protect your retirement savings or future earnings. Accidents happen every day – umbrella insurance is an affordable way to protect the assets that you’ve worked hard to acquire.
The decision on whether to get it calls for weighing the risk of what you stand to lose – current assets as well as the potential loss of future income or earnings.
- How much does it cost?
For the amount of protection it offers, liability insurance is surprisingly affordable. It’s especially affordable if you already have a policy with the same insurance company.
Price varies based on the following:
- Coverage amount: The higher the coverage amount you choose, the more expensive your umbrella policy will be.
- Risk factors: The higher your risk factors, such as a high-risk occupation or a history of accidents, the more expensive your policy will be.
- Insurance company: Different insurance companies may have different pricing structures and risk models, which can impact the price.
- Location: The cost of living and the likelihood of certain risks can vary by location, which can also impact the price.
- Deductible: Choosing a higher deductible can lower the price of your policy.
- Credit score: Your credit score can impact the price of your policy.
- Is Umbrella Insurance Tax Deductible?
If you have a personal umbrella policy, your premiums are not typically tax-deductible. If you own a business and have an umbrella policy that supplements your other business liability policies, your premiums may be tax- deductible.
One particular gray area exists with owners of rental properties. If you own homes and rent them out, you are conducting a business transaction, but you can also include your rental properties under a personal umbrella policy. In this case, you may be able to deduct a portion of your premiums from your taxes. Please check with a tax professional!
- How much umbrella insurance do you need?
It’s wise to have at least enough liability insurance to cover your assets. To decide how much umbrella insurance coverage you need, add up the value of your property, savings, and investment accounts. Then, take a look at the liability insurance you already have through your existing policies and buy enough umbrella insurance to make up the difference.
A good insurance agent can help you through the process of determining the right coverage limits.
- Does umbrella insurance cover rental property?
If you are a landlord or own rental property, umbrella insurance may cover some or all of your properties, depending on the carrier and policy. Personal umbrella insurance policies generally aren’t designed to cover the risks associated with someone who owns many large rental property units. These typically need to go under a commercial umbrella policy. For this reason, you might find that your umbrella policy would cover a small number of units, typically under 4 units per home for a personal umbrella.
- Does it cover car rentals?
Yes, many umbrella policies can provide coverage for rental cars, but it depends on the specific terms and conditions of your policy. Umbrella insurance is designed to provide additional liability coverage beyond the limits of your underlying insurance policies, such as auto, homeowners, or renters insurance. If your auto insurance policy includes liability coverage for rental cars, your umbrella policy may extend this coverage to provide additional protection.
- Can umbrella insurance cover auto?
One of the most common uses for umbrella insurance is to protect yourself from damage caused by an auto accident for which you are liable. It provides coverage that extends beyond the limits of your personal auto liability.
However, depending on your carrier, there may be certain vehicles that are excluded from coverage. Such vehicles might be high-performance supercars, such as a Lamborghini or Ferrari.
- Can umbrella insurance from one company cover auto insurance from another company?
Yes, but because most umbrella insurance carriers require you to have an existing policy with them, this might not always be the case. If your umbrella insurance carrier doesn’t require you to have either personal liability or auto insurance with them, you could potentially have auto insurance with one company, and personal liability and umbrella with another.
- Does umbrella insurance cover injuries to passengers?
Yes. If you are liable for injuries to a passenger as a result of an auto accident, your umbrella insurance could kick in if the resulting costs exceed the limits of your underlying auto insurance. This might include the passenger’s medical bills, but could also include a lawsuit for additional damages.
- Does Umbrella Insurance Cover Uninsured Motorists?
Most personal umbrella policies have an option to elect uninsured/underinsured motorist coverage.
- Do renters need umbrella insurance?
Renters, or people who live in a rented space like an apartment or condominium, can certainly find an umbrella policy helpful. It comes down to your personal level of risk, the total value of your assets, and the limits of your existing coverages.
It’s worth noting that not all renters insurance policies are the same. While some carriers provide renters insurance products that combine property and liability coverages, others may offer them separately. Whether you purchase a renters policy that combines coverages, or choose to purchase them separately, the personal liability portion would be considered the underlying coverage for an umbrella policy and would be required for eligibility. In any case, the umbrella policy would pick up coverage after the underlying personal liability coverage had been met.
- Will umbrella insurance cover a lawsuit?
One of the primary uses for umbrella insurance is to protect the insured from lawsuits for bodily injury, property damage, or personal injury. Of course, there are always limits and exceptions to the types of lawsuits an umbrella policy will cover. For example, your umbrella policy is not likely to cover you if you’re sued for intentionally breaking a neighbor’s windows because they didn’t turn their stereo down last night.
- Does umbrella insurance cover slander?
Yes. Both libel and slander fall under a type of coverage called “personal injury,” which is included in an umbrella policy in addition to bodily injury and property damage coverages. Personal injury might sound synonymous with bodily injury, but actually refers to injuries that arise out of offenses such as false arrest, detention, imprisonment, libel, and slander.
As with most coverages, there are exceptions, and certain types of libel or slander are not likely to be covered by a policy. For example, if the insured individual knows that the libel or slander is false, or if any criminal act is committed, they would not be covered. Furthermore, an umbrella won’t provide coverage for any offense against an employee of an insured. As an example, suits that arise out of charges of discrimination in hiring, firing, or promotion won’t be covered.
- Does umbrella insurance cover professional liability?
A personal umbrella insurance policy is generally not designed to cover professional liability. In fact, professional liability policies are an entirely separate sort of policy.
Professional liability insurance, also known as errors and omissions (E&O) insurance, is specifically designed to cover claims arising from professional services provided by individuals or businesses, such as doctors, lawyers, and consultants. There are separate commercial umbrella policies for this.
- Does Umbrella Insurance Cover Malpractice?
As a professional in certain healthcare and legal fields, you probably have a comprehensive malpractice insurance policy already in place. If you are sued and the limits are exceeded on your malpractice policy, your business umbrella policy can pay up to the policy coverage limit but that depends on the terms of your business umbrella policy.
- Does Umbrella Insurance Cover Property Damage?
Umbrella insurance will cover property damage in most but not all circumstances. We all know accidents happen, and you never know how extensive the property damage can be until you get an estimate.
If you cause an accident involving several cars, everyone may walk away unscathed but the property damage to other cars can be enough to break the bank.
- Does Umbrella Insurance Cover Dog Bites?
Umbrella insurance covers dog bites under most circumstances. If your dog bites your neighbor, you are liable for that person’s bodily injury. Umbrella insurance can also cover you if your neighbor decides to seek legal recourse.
Additionally, depending on the insurance company issuing your homeowners policy, an umbrella policy may be your only protection if you own certain aggressive dog breeds that are excluded from your homeowners policy.
- Does Umbrella Insurance Cover Floods?
Umbrella insurance typically does not cover flood damage. It will only cover property damage and bodily injury that you cause and will only provide payment to a third party. However, there are water damage scenarios that your umbrella insurance might cover. Check the terms and conditions of the policy you want to purchase!
- 24. Does everyone in my house have to have insurance for me to have an umbrella policy?
While umbrella insurance policies provide additional liability coverage for you, the insured, it also provides coverage to your immediate family members. For the purpose of these types of policies, “family member” is defined as a resident of your household who is a relative, which can include a ward or foster child, or someone who is under the age of 21 but under the care of another insured who is age 21 or over.
- 25. Is umbrella insurance the same as an excess liability policy? What’s the difference?
Umbrella insurance and excess liability insurance are quite similar; they both offer additional coverage beyond the limits of your underlying insurance policies. Like umbrella, excess liability picks up where the limits of the underlying policy ends. If your underlying liability coverage is $1 million, and you are sued for $1.5 million, a $1 million excess liability policy would cover the additional $500,000 – just like an umbrella policy.
The difference has to do with the specific policy details or terms of the policy. In general, umbrella insurance is broader in scope than an excess liability policy and provides additional coverage for a wider range of liability claims.
- Does my business need commercial umbrella insurance?
Every business should consider supplementing its standard insurance coverage with an umbrella policy. Today, any business can be sued, and juries often award large settlements. Your policy limit on your general liability and commercial auto policies might be lower than the judgment award, leaving your business to pay the remaining settlement amount out of pocket. That could put you out of business.
Commercial umbrella coverage can fill the gap and protect your company from financial disaster with flexible limits of up to $25 million, at affordable rates.
- Why Is Umbrella Insurance Important?
Your car, house, investments and retirement accounts, as well as your normal checking and savings accounts and even future income, are all considered assets. It is important to know that if you are sued for a lot of money and do not have enough liability insurance or an umbrella policy to cover those costs, all of your assets are exposed.
People typically choose to buy an umbrella policy because they want to prevent the possibility of financial ruin due to one misstep or unforeseen accident. Umbrella insurance can provide the protection to prevent such an outcome.
- Is umbrella insurance worth it?
Umbrella insurance is one of the most cost-efficient ways to protect your family and assets. Take a look at potential risks to see common scenarios in which umbrella insurance will come in handy.
To customize an umbrella policy that’s right for you, talk to your local independent insurance agent for more information. If you’d like to speak to us, check out our contact form (link it here).
- How to Choose the Right Policy
The best insurance plan can offer high liability limits that are typically beyond the reach of other policies. Consider policies that issue covered perils and those that offer all-risk policies. An all-risk policy will cover any risk except for the ones specifically excluded.
- How do I get an umbrella insurance quote?
For an umbrella insurance quote, contact your local independent insurance agent.
Protecting you and your family from potential devastating liability and lawsuits is key. An umbrella policy can provide peace of mind with a low-price tag.
For more information, speak with contact or email (link here) ONYX Insurance Brokers to determine your specific risk factors and learn more about how to protect your current and future assets.
