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Umbrella Coverage 101
The more your earning power and assets increase, the more you have at risk, and therefore, the more you need to protect. If you think you need at least a million dollars of additional protection
above your current homeowners or automobile liability limits, you can
purchase something called excess liability. Often referred to as an
umbrella policy, excess liability is the additional protection you
need in case a judgment against you exceeds the liability limits of
your existing auto or homeowners policy. Available in amounts ranging
from one to five million dollars, excess liability coverage increases
your personal liability limits by adding protection to your current
auto, boat or homeowners policies. Homeowners insurance provides a minimum of $100,000 liability coverage (the coverage that protects you when people are injured or property is damaged due to circumstances in which you or your family are responsible). Although it varies widely by state, the typical minimum liability protection for auto insurance is around $25,000 per person and $50,000 per accident. With both of these coverages you can purchase higher limits (or amounts) of liability protection...but the most that can be purchased is $500,000 for homeowners policies or $250,000 per person, $500,000 per accident for auto insurance. Again, this may not be enough protection in today's lawsuit frenzied environment where million dollar judgments are fast becoming the rule rather than the exception, even for seemingly minor situations. To understand more about what excess liability coverage is, and how it can help you, please review the following topics:
Available in amounts ranging from one to five million dollars, excess liability coverage increases your personal liability limits by adding protection to your current auto, boat or homeowners policies. Also, if something is not covered in your homeowners policy (like libel), and it's not specifically excluded in the excess liability policy, you're covered. Excess liability coverage provides:
Depending on the type of accident, your homeowners, auto or boat policy liability limits are used up first, then the excess liability policy covers all remaining costs (up to the amounts of coverage you purchased). For example, if your neighbor dove into your swimming pool and broke his neck, your homeowners liability coverage would pay for the first $100,000 in damages. Your excess liability policy would cover the rest (including associated legal fees) up to the one million dollar policy amount that you had purchased. Most companies require that you carry certain limits on your primary insurance policies (homeowners, auto and boat) in order to receive excess liability coverage. For example, a company may require the following primary liability limits: $100,000 for homeowners, $250,000 per person/$500,000 per accident for auto and $300,000 for boat/yacht coverage. Insurance products tend to get loaded down with legal-sounding jargon, especially a product that specifically deals with circumstances for which you are legally responsible. Therefore, a few common definitions might help clear up any confusion: Personal Liability: Coverage for damages that you are legally liable (responsible) for. This includes incidents occurring at your home and/or caused by you, residents of your household or your pets. Here are some common examples: your dog bites someone, a guest falls down your front steps, your teenage son rough-houses with his buddy and accidentally breaks that friend's leg! Personal Injury: This all-inclusive definition covers many predicaments. Personal injury can take many forms, including: bodily injury, shock, emotional distress, mental anguish, sickness or disease, or death arising from any of the above. Personal injury also means false arrest, detention or imprisonment, malicious prosecution, wrongful entry or eviction, humiliation, libel or slander, defamation of character or invasion of privacy. Property Damage: Accidental damage to the property of others caused by you, residents of your household, or your pets. Often, insurance policies are defined not by what they cover, but by what they don't. This is especially true for excess liability products. If something is not specifically excluded, you're covered. Exclusions vary widely by company. Here are some common exclusions:
Obviously, determining how much coverage is right for you is a personal decision. Much depends on the value of the current assets you have to protect. However, there are also other factors to take into consideration. What will the value of your future assets be? Are you involved in activities that put you at greater risk? Do you have teenagers? Do they drive? Your local independent agent or Travelers representative can help you determine the coverage amount that works best for you. Money-saving discounts are available in most states if your car, home or boat is already insured with the same insurance company. Additionally, some companies are beginning to offer an endorsement (add-on coverage) to existing homeowner policies that increases your liability limits to the millions! Your independent agent or Travelers representative can help you determine whether this endorsement is available, as well as help you determine the best money-saving coverages available. |
The more you have, the more protection you need