Okay, you have a policy for your home and the
cars driven by your family. You have just the right policy for
the apartment you rent out to others as well as special coverage
for your boating excursions. Your homeowner's policy even has
a special form to cover the activities connected to the business
that your spouse runs out of your home. Yes, it looks like you
can breathe a sigh of relief and be confident that you have all
the coverage you need. Or should you have an umbrella? An umbrella
is the term for a liability policy that covers your other, primary
liability coverage on an excess basis (and often to provide coverages
that aren't available under the primary coverage).
Not in the case of carrying umbrella coverage.
Umbrellas are designed to be carried over a person's primary or
underlying liability coverage. A person's primary coverage is
typically part of his or her personal automobile or homeowner's
coverage. Primary refers to the fact that in the event of a loss,
the liability portion of your auto or homeowner coverage is the
first to respond, that is they respond on a primary basis. Umbrellas
or excess liability policies respond to an eligible loss only
after the primary insurance has paid its limit. It's quite possible
that your primary insurance limits provide more coverage than
you'll ever need. However, loss circumstances could result in
primary coverage that's not covered by a policy. For instance,
your newly licensed child is driving the family car and slides
on an icy highway. He ends up causing a chain collision damaging
several cars and injuring a dozen drivers and their passengers.
If you don't have enough primary coverage, any shortage may have
to come out of your personal assets. Or maybe you often volunteer
to help transport members of your son's first grade class on field
trips and you have an accident because you tried to beat a yellow
light.
Umbrellas generally provide additional liability coverage for
the following underlying policies:
The additional coverage may often extend to providing for related
expenses such as the cost of providing a court defense.
Of course, umbrellas don't always work on an
excess basis. Umbrellas may act just like an underlying policy
for losses that are not generally covered by your auto or homeowners.
In this case, an umbrella may respond the same way as a primary
policy. For instance, you may have to go to court after being
accused of defaming another person. The liability section of your
homeowners policy may not cover this type of loss, called personal
injury, but it may be a covered cause of loss under an umbrella.
You may also need an umbrella to handle odd situations such as
hobbies or activities that may increase a person's chance of facing
liability losses. For example, you have an in-home hobby of training
guard dogs or you publish a newsletter on the Internet covering
local or state politicians.
In certain instances, umbrellas may provide coverage for any amount
of a loss that exceeds the policy's deductible. However, in place
of "deductible," umbrellas refer to a self-insured retention
or SIR. IMPORTANT: don't get confused into thinking that umbrellas
pay for anything that is excluded under a primary policy. Umbrellas
do provide broader coverage, but only a careful evaluation of
the actual policy wording will reveal the extent of the additional
coverage. In certain cases, an umbrella may "follow the underlying
coverage". This means that the umbrella covers ONLY the situations
covered by its underlying coverage. In this case, the umbrella
also excludes a loss that's excluded under a primary policy.
You may or may not be feeling the need to carry
an umbrella. The best way to find out if extra coverage is necessary
is to discuss your coverage needs with a professional insurance
agent. Especially if you have a larger than average amount of
personal assets or are involved with activities that could expose
you to larger liability losses.
440f001
Doesn't "Excess" Mean
Too Much?
Why Isn't Coverage Excluded?
So, Do You Feel Any Rain Drops?