Purpose of and Coverage Afforded by Umbrella Insurance

Primary Insurance Policies that cover the insured’s home, car, boat or other personal items, have a coverage limit on liability. This refers to damages you are liable to pay in case of acts due to negligence that occurred, due to your fault (or on your property), which resulted in bodily injury or property damage to one or more individuals. In the last decade or more, lawsuits around such incidents have increased, and in some cases, judges have awarded damages to the tune of 1 million dollars to the victim(s). This puts you at severe risk, considering that your primary policy does not provide coverage for such large amounts. 

Excess Insurance is not the best solution as it is a “follow form” policy that replicates the same policies and coverage as the primary policy, but has higher liability limits.

Liability Insurance or ‘Umbrella Insurance’ is a better solution. Compared to Excess Insurance, Umbrella Insurance has a broader cover and higher liability limit, which is added to the primary policy’s liability limit. For example, if your primary automobile insurance has a cover of USD 300,000, and the Umbrella Insurance has a cover of USD 1 million, your net coverage in case of damages due to an automobile accident is USD 1.3 million.

Coverage

Umbrella Insurance covers all those items, which have an economic value, or can generate income for the insured in the future.

• Personal Injury Coverage: This protects you in case of claims made by others for personal injury, or property damage, caused by you or any member of your family, including pets (as in the case of dog bites), for mishaps that occurred on your property. Example: a visitor slips and falls,in your premises
• Personal Liability Coverage: is for incidents that happened off your premises. Example, while reversing your car, you happened to knock down the neighbor’s pet cat
• Additional Protection:on top of the primary automobile policy for automobile accidents and liabilities. Example: Your car’s parking lights were not on, and another car crashed into your car
• Non-business Liabilities: such as slander, libel, false arrest and wrongful eviction
• Advertiser’s Liability: example- A product or service that you are promoting has flaws which can cause bodily harm or property damage to the user
• Worldwide Coverage: This covers all the above possibilities when you are outside the United States
• Employers' Liability: Injuries sustained by your employees, during work hours, at the work premises
• Aviation Liability: Bodily harm or property damage caused by an aircraft owned by you
•  Marine Liability: Bodily harm or property damage caused by a yacht/boat/hovercraft  owned by you
• Liquor Law Liability: You own a bar/pub/restaurant and one of the customers assaults another at your premises. Or he/she drives under the influence of alcohol and causes bodily harm or property damage to another person
• XCU Liability: XCU stands for Explosion, Collapse and Underground; this coverage is a form of commercial general liability that is applicable when your employee is injured in one of these three situations while at work

Umbrella Insurance covers a wide range of situations, and is very cost-effective. You can increase your cover from USD 1 million to 5 million by paying a premium of USD 200 for the first million and USD 100 for each million thereafter.

Umbrella Insurance fills the gaps in your primary policy and provides additional protection if you stand the risk of being sued. Seek the assistance of your Insurance Company, Financial Advisor or CPA who will guide you through the fine print and help choose the right Umbrella Insurance Policy for you.