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What is Personal Umbrella Insurance?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 07 September 2016
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If a person falls asleep at the wheel when driving home, he could cause an accident that seriously injures several people. Someone who has been meaning to fix the deck in his backyard might fail to do so before a guest walks over it and falls through. In these cases, the injured parties may sue the person responsible for a great deal of money. Auto insurance will offer some coverage in the first case, but it will pay only to the amount of liability the policyholder possesses. Likewise, a homeowner’s policy will pay out at the liability rate that the owner has purchased. In these cases, personal umbrella insurance, sometimes also called personal liability insurance, can help the person survive a lawsuit without losing everything he owns.

Personal umbrella insurance acts as protection once an individual's other policies have been exhausted. In cases where it is not purchased, causing an accident can mean that the person responsible must surrender of all his material goods in order to assess their value. Most often, the property is assessed is the home, cars, and boating goods that the person owns. Other property, like jewelry and assets, may also be part of the money that a person in a lawsuit can claim. Additionally, a portion of the person's salary may need to go to any successful claimants for many years, if not for the rest of his life.

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Even if a lawsuit does not result in a huge reward, court costs are frequently high and exceed amounts an auto or home insurance will allow. Umbrella insurance will also step in to allow for repayment of court costs without the policyholder needing to sell assets to meet these costs.

Personal umbrella insurance coverage and costs vary by company. Most require that that a client carry a defined amount of liability on a car or home policy. If he does not meet this requirement, he will be personally liable for the difference between the liability limit he should have carried and the limit that he does.

Most policies can insure liability at huge numbers, often starting in the millions of US Dollars (USD). Policies can stretch to the multiple millions, and what the policyholder owns should determine how much he purchases. Someone who has few assets may find that this type of coverage may actually attract rather than discourage lawsuits. A claimant knows that he or she can get more money as a result of the coverage.

With highly valued property, however, personal umbrella insurance is a must. The investment on such policies is generally not high, and it may translate to about $100 USD a year for $1,000,000 USD in coverage. With lawsuit awards on an upward trend, it’s probably better to purchase a policy that can offer $5,000,000 USD in coverage, although people with fewer assets likely won't need so much.

Financial experts often recommend that most people not skimp on this type of insurance, and they suggest that those in the marked should compare prices and buy a policy. Discounts may be available if the policy is purchased through the same company that provides a person's auto or home insurance. Companies often offer reduced rates when multiple types of insurance are purchased.

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anon173744
Post 4

It's easier to compare your auto, home and investment property umbrella insurance today than it has been before. Even if you live in NJ and your policy kept renewing, it's always a good idea to review your policies annually and shop around.

geronimo8
Post 3

There are so many different kinds of insurance policies these days, and now I've learned of a new one -- personal umbrella insurance. It really does seem like there is an excess of insurance policies we are expected to have.

While the idea of losing everything I own to an accident is terrifying, I don't think I can afford to keep buying additional insurance policies.

Maybe I'll look into seeing if I can get a discount through my current insurance company. But I know there will just be a new kind of insurance I'll need soon! I'd rather just enjoy life than spend everything I have on insurance policies!

eagles543
Post 1

While living in Pennsylvania, I've had a personal umbrella policy for a number of years. I moved to New Jersey in 2005 and notified my Penna. agent of the change of address at that time. They kept renewing my Penna. Umbrella policy each anniversary since then. However, I've now been advised that such coverage *must be written in the state of primary residence* which, in this case, is New Jersey and there were grounds for the insurance company to deny claims on these grounds. In addition, my NJ rate is less than one-half that of Penna. I feel I've been ripped off! Please advise.

Thanks,

Eagles543

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