Among the many types of liability insurance there is a relatively unknown one called an umbrella liability policy. I had never heard of it until my brother who is an attorney suggested we purchase one. The division for public education for the American Bar Association states an umbrella liability policy, also called personal excess liability is designed to protect you in case of a big judgment that would quickly eat up your regular policy coverage.  This can be a type of business liability insurance coverage or personal liability insurance.

Many people think these policies are just for the rich and that they are expensive. Additionally, the general consensus is the policies are too complicated to coordinate with your existing policy. According to MSN money these are all myths. Umbrella liability is relatively inexpensive compared to other types of insurance, can be easily coordinated with your existing insurance policies (it is much less complicated if you have all your insurance with one company) and is not just for the rich and famous.

So if you’re not rich and famous, why do you need an umbrella policy? Well, most of us have something called assets and we need to protect them. The division for public education for the American Bar Association says that people usually determine their need for umbrella liability coverage not so much by how may potential hazards they have on their property as by the assets they have to protect. MSN money gives three typical examples where your umbrella policy would come into play. They are as follows:

  • An auto accident in which you’re sued under your auto insurance policy.
  • Your neighbor slips and falls on your property, and you’re sued under your homeowners insurance.
  • A natural disaster in which another person’s property is damaged by, say, a tree on your property crashing down on their vehicle or home. This usually falls into the, “I thought that was covered by my homeowner’s policy” category.

Both auto and homeowners have liability coverage but that is usually limited to about $300,000. If you get sued for a million, the injured party can go after your assets to recover the $700,000. Your premium for the umbrella policy will be determined based on the number of houses, rental units and vehicles you own. The umbrella liability policy is usually sold in increments of 1 million dollars and it costs about $150 to $300 per year. The next million will cost about $75 and $50 for every million after that. Now you see why it’s considered relatively inexpensive. Consider the value of all your assets and compare that to $300 per year to protect them.

The only catch is that insurers will require you to have about $250,000 of liability insurance on your auto policy and $300, 000 of liability insurance on your homeowner’s policy before they will issue an umbrella liability policy. Since the umbrella only comes out when your other policies are exhausted, insurance companies will require you to have those policies in place.

If you aren’t sure about your own coverage, would like to obtain better insurance, or just need cheaper rates, find the best home and auto insurance quotes here.

umbrella liability, liability insurance, home insurance auto insurance, business liability insurance

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This entry was posted on Wednesday, March 12th, 2008 at 5:50 pm and is filed under Business Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.