Although the word “umbrella” sounds like its covering everything you own and operate don’t feed into that false sense of security without understanding the fine print. I hear this phrase so often from clients and prospects that it makes me wonder if they know exactly what they’re buying. For starters, the Umbrella is not a “catch-all” policy. It doesn’t usually fill in the gaps that a home or auto policy may have in it. It does not give you added protection from claims that are very rare and usually not covered under traditional policies. And most importantly, it doesn’t provide coverage for things that you forgot to tell your insurance agent about! Do I have your attention yet?
Traditional Umbrella policies are basically designed to provide you with higher limits of liability. Umbrellas do not give you coverage for additional perils or causes of loss. They are specifically designed to provide higher limits over the same perils that are covered by the underlying liability policies (home, auto, recreational vehicle, etc.). In short, if a claim is not covered by your Personal Auto Liability Policy then it’s probably not covered by your Umbrella either. The Umbrella is designed as a more cost effective way for clients to buy higher limits of liability over and above their underlying policies.
Umbrella Policies are not created equal. Every insurance company has their own forms and different ways they may or may not cover underinsured/uninsured motorists, underinsured personal liability, and directorship on boards. Personal Umbrellas generally do not cover anything related to a business and Business Umbrellas don’t generally cover anything related to Personal Liability. It is very important that you understand how your Umbrella policy is written and exactly which policies it is providing coverage over.
Personal Umbrellas are meant to cover you for catastrophic liability situations that could potentially send you into personal bankruptcy in their absence. These catastrophes remind us of the reason we buy insurance and manage risk in the first place. Of course, we all think of the low probability and low severity of an accident but when a terrible catastrophe does occur we need to be prepared. Because it can happen to you!
About the author: Kristy Hoffman, CISR specializes in managing risk and insurance for families and individuals to give them that: Relax. You’re Covered. feeling