Answering your questions about umbrella insurance

Sorting out different types of insurance can cause anyone to become confused. One of the least understood types of coverage is an umbrella policy. What does it cover? Who needs to have one? How much coverage should those people have and how much does a policy cost? NICRIS Insurance in New York is here to answer those questions.

What is Umbrella Insurance?

Umbrella insurance is liability coverage over and above what is included in your homeowners, auto, or watercraft policy. It is designed to protect people who have a higher risk of being sued for injuries or damage to another person’s property. It can also protect you against libel, vandalism, slander, and invasion of privacy. Umbrella insurance goes into effect after you have reached the limit of your regular liability coverage.

A brief 411 on liability insurance

Every homeowner and driver already carries liability insurance. It can help you avoid financial catastrophe if you are responsible for an accident or damage to someone else’s property. For example, if you run a stop sign and hit another car, resulting in an injury to the other driver, you would be liable to pay for that person’s medical bills, lost wages, and damage to his/her car.

Liability insurance helps cover those costs, so you do not end up paying out of your own pocket. When you consider that a hospital stay and auto repair bill can easily be tens of thousands of dollars, you begin to understand the importance of liability insurance.

Think of umbrella coverage as “liability insurance Plus.” In fact, sometimes it is called “excess liability insurance.”

Who needs umbrella insurance?

Umbrella insurance should be considered by anyone who has a higher risk of a lawsuit. This can include business owners, property owners, people in the public eye, and anyone with substantial assets.

Who should consider umbrella insurance?

Some common individuals and factors include:

  • Property owners
  • Anyone with significant assets or savings
  • Anyone who worries about liability when traveling outside the U.S.
  • Dog owners or anyone who owns a trampoline
  • Anyone who engages in activities that can result in a lawsuit such as a:
    • Youth sports coach
    • Landlord
    • Board member of a non-profit organization
    • Certain volunteer positions
    • A columnist or blogger who posts reviews of products, services, or businesses
    • Someone who engages in sports or activities that can result in serious accidents or death (hunting, skiing, surfing, sky diving, etc.)

What does an umbrella policy cover?

Umbrella insurance pays for much the same thing as liability insurance, only “extra.” Examples include:

  • Injuries and funeral costs
  • Damage to someone else’s property
  • Judgments in lawsuits involving slander, libel, personal attacks, and defamation of character
  • Legal defense and court costs
  • Injuries or property damage suffered by a tenant
  • Covers rental items that you don’t insure yourself such as a boat or Jet Ski

How much umbrella insurance do you need?

One suggestion is to buy enough umbrella insurance to cover your net worth, which includes savings, assets, and income. Also, consider any potential income you may earn in the future. Umbrella coverage starts at $1 million.

According to the Insurance Information Institute, “Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. Most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners’ policy before selling you an umbrella liability policy for $1 million of additional coverage.”

How much does an umbrella policy cost?

Umbrella insurance is surprisingly affordable, considering how much good it could potentially do in protecting your life savings and assets. Prices vary, of course, but a policy can usually be bought for $150 – $300 a year for $1 million in coverage. The next million would typically cost about $75 more, and then $50 for every million after that.

Umbrella insurance offers extra liability coverage in the event of a lawsuit. If you are someone at higher risk, it can be a wise investment to protect your assets and save you from financial ruin.

If you have questions about an umbrella policy or you want to know how much coverage to buy, schedule a free, one-hour personalized insurance review with NICRIS Insurance or call us at 516-544-0006.