Umbrella insurance is aptly named. Umbrella is liability coverage that kicks in when a claim is excluded from coverage or when your other liability limits have been maxed out. You might think your home and auto insurance policies are enough for the foreseeable future, but there may come a time when your assets and investments are at risk as the result of a claim. Let’s examine five reasons you might want to consider umbrella insurance.

Reason 1: Above & Beyond Policy Limits

Both your home and auto policies provide liability coverage for bodily injury and property damage you may cause to others or that happen on your property. Each coverage has a limit, and once you reach that limit, you’ll have to pay the remainder out of your own pocket.

The most common way to exceed the policy limit is if you cause any major injury, especially one resulting in a disability, or worse, a fatality. Being sued is another, as the fees of a drawn-out legal battle alone could drive someone, who isn’t properly insured, into bankruptcy. These are litigious times.

Umbrella insurance can step in at a very reasonable cost and add a sizable amount to your liability insurance if your home or auto coverages have been exhausted.

Reason 2: Insult Added to Injury

Umbrella insurance may cover claims not traditionally covered by home or auto insurance, such as libel and slander. Although, you can ask your agent if Personal Injury coverage can be endorsed onto your policy, which will provide underlying coverage for libel, slander, etc.. Libel and slander both involve false statements that damage someone else’s reputation; slander is spoken, and libel is written.

Anyone who spends time in the public eye (budding entrepreneurs, authors, lecturer, and similar roles) will find this coverage useful. Social media makes it easy to publish embarrassing photos and videos of otherwise respectable people caught unaware during a night of drunken revelry or any other vulnerable moment.

Reason 3: Arrest & Release

Umbrella insurance provides coverage for wrongful arrests, including detention and imprisonment. It also extends to malicious prosecution.
The policy will cover all legal and defense costs to secure your release, protect your reputation and get any false charges thrown out.

Reason 4: Asset Protection

Major lawsuits looking for a big payout can target not only your current assets but your future earnings. Since your liability coverage is paying your defense costs, umbrella insurance can save you from having to liquidate your assets and remain in debt for years following a legal judgment.

If you own and rent out any property, umbrella insurance extends liability coverage to the units you rent. That’s important if someone injures themselves and sues you. Umbrella may also step in if your home insurance doesn’t cover dog bites or indirect liability (e.g., a drunken party guest has a car accident).

Reason 5: Extended Definition of “Injury”

Some lawsuits often include a claim for pain and suffering. Umbrella insurance extends the definition of bodily injury to include the psychological cost of an incident if you are judged to be at fault. This is not covered by your home or auto policy, and it can run well into the hundreds of thousands of dollars.

Umbrella insurance policies will always step in after the coverage from your primary insurance policies have been exhausted. It does not cover your property (just your liability), but it does fill many coverage gaps at a reasonable cost.