Personal Insurance - Personal Liability Umbrellas

Personal Umbrella Liability Insurance

If you (or a member of your household) accidentally injure another person or damage someone’s property, liability insurance protects your assets. Because it protects you if a third party files a claim against you, it’s also known as “third-party insurance.” In the event of a lawsuit, liability insurance will pay for a legal defense as well as medical and/or property claims for which you are found legally liable, up to the limits of the policy. You can purchase personal liability insurance as part of a package policy (such as homeowners, renters, or auto insurance), or as a separate policy (such as a personal umbrella liability policy).

An umbrella policy will either pay the part of the claim in excess of the limits of your basic liability coverage or pay for certain losses not covered by your basic personal liability insurance if you are found to be legally responsible for injuring someone or damaging someone’s property. No one expects to be sued, but a good personal liability policy can certainly help to protect both your family and their future.

Why do you need it?

Most states now require you to carry auto insurance with minimum liability coverage (which varies from state to state), and a standard homeowner’s policies usually provide $100,000 to $300,000 worth of liability coverage. You can purchase additional liability coverage under these policies, but amounts may be limited. You’ll have to pay for anything beyond the liability coverage limits of your homeowners/renters or auto insurance policy without a personal umbrella liability policy.

How does it work?

Designed to kick in when your other liability coverage is depleted, personal umbrella liability insurance supplements the basic liability coverage provided by your other insurance. Once the basic liability limit under the primary policy is reached, your personal umbrella liability policy covers the remaining costs, up to the policy limits. That’s why umbrella liability insurance usually carries a high deductible. Insurance companies typically require you to have homeowners/renters and auto liability insurance equal to the amount of your personal umbrella deductible.

When should you get it?

There’s no time like the present! Almost anyone can be subject to a major liability lawsuit, but there are some events that increase your liability exposure–like starting a home-based business, or having a teenaged child who gets his or her driver’s license–so you should examine your liability coverage at these times.

What does it cover?

Typically, a personal umbrella liability policy provides the following protection, up to the coverage limits specified in the policy:

  •     Protection for claims of personal injuries or property damage caused by you, members of your family/household, or hazards on your property, for which you are found legally liable
  •     Personal liability coverage for incidents which occur on or off your property
  •     Additional protection above your basic auto policy for auto-related liabilities
  •     Protection against non-business-related personal injury claims, such as slander, libel, wrongful
  •     eviction, and false arrest
  •     Legal defense costs for a covered loss, including lawyers’ fees and associated court costs

So, how much is enough?

There is no one-size-fits-all answer when it comes to determining the correct level of personal liability insurance coverage. Some people think that you only need enough liability insurance to protect your assets, but a major judgment against you could easily deplete your assets as well as put your future earnings in jeopardy. Some factors you should consider include the following:

  • Do you often entertain?
  • Do you operate a business in your home?
  • Do you have a long commute to work or do you take frequent trips in your car?
  • Do you have teenage children? Do they drive?
  • Does your job or your economic situation make you a likely target for a lawsuit?