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What is Umbrella Insurance?

posted on Thursday, June 23, 2022

Navigating the different types of personal insurance can be difficult.  Our team of licensed insurance agents is here to guide you through what umbrella insurance is, how it works, who needs it, along with what it does and doesn’t cover.

What is Umbrella Insurance?

Accidents happen and they can be expensive, especially if your current liability insurance does not cover the injuries and medical bills associated with the incident. That’s where umbrella insurance comes in and saves the day.  Umbrella insurance is a type of liability insurance that supplements common liability policies like auto, home, and renters insurance. Where umbrella insurance policies differ from your regular policies is the higher limit and broader coverage for circumstances where coverage is not sufficient on your home and auto policies.

How Does Umbrella Insurance Work?

Umbrella insurance policies work by picking up where your typical liability insurance leaves off. Let’s say the neighbor kids are sledding in your backyard. One kid falls off the sled and breaks her arm and the family wants you to cover the medical treatment.  Or you own an apartment complex and one of your tenant’s dog bites another tenant. The tenant then decides to sue you for their medical bills. In these instances, an umbrella insurance policy would cover the costs of the medical bills that is remaining from your typical liability insurance. If you did not have umbrella insurance you would be paying for the rest of the bills out of pocket. Umbrella insurance also provides coverage to more than just you, the policy holder. It extends to those within your household as well.  

Here’s another example: Say you’re in a car accident and are held liable for $500,000 in damages and medical costs. Your current auto insurance policy covers only $300,000, leaving you to pay the remaining $200,000 out-of-pocket. This is where having an umbrella insurance policy would save you from wiping out your savings account because it has the potential to cover the leftover $200,000 you owe.

Who Needs Umbrella Insurance?

As you might be able to tell, anyone can benefit from an umbrella insurance policy. The types of lawsuits that umbrella insurance usually cover are the ones that have the ability to wipe out your whole savings.

A good rule of thumb on whether to purchase umbrella insurance or not is if your auto or homeowner’s liability insurance is less than the overall value of all of your assets. When calculating, make sure you include all of your assets, including both checking and savings accounts, investment accounts, retirement and college saving accounts, and the equity of your home.

It is also a good idea to consider purchasing an umbrella insurance policy if you feel you are at a greater risk of being sued. In other words, if you partake in activities or own things that put you at a higher risk of being liable. Some examples include:

  • Youthful drivers
  • Having a swimming pool
  • Owning a trampoline
  • Having a pet on your property
  • Owning multiple homes

In the case of an accident an umbrella insurance policy can give you an extra level of protection that will better insulate your net worth and protect your assets.

If you are considering an umbrella insurance policy reach out to our experienced insurance team. Our agents can take a look at your current auto, homeowner, renter, and recreational vehicle insurance policies and determine how much extra coverage is right for you and within your budget under an umbrella insurance policy.

What Does Umbrella Insurance Cover?

Umbrella insurance protects you from acquiring large payouts from bodily and personal injury claims, property damage, landlord liability, and defamation and slander lawsuits.  Here are a couple more scenarios to outline what is generally covered by umbrella insurance:

A clothing company sues you for writing a slanderous review online.
You are the cause of a boating accident that causes multiple injuries and the cost of the medical bills is greater than your boaters insurance.

Have any questions about what is specifically covered by umbrella insurance? Our Midwest Heritage insurance agents are right at your fingertips to answer any questions! Request your FREE insurance quote today.

Excess Coverage or a Necessity?

Ultimately, umbrella insurance policies are the extra coverage used to extend your current liability insurance. While the chance of you using your umbrella insurance is somewhat slim, having the policy could mean the difference between paying $0 or wiping out all your savings because your dog decided to bite the neighbor’s kid. What is peace of mind worth to you?

To learn more about and find out if an umbrella insurance policy is right for your needs, reach out to a Midwest Heritage insurance agent today.

FAQs About Umbrella Insurance

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Products offered by Midwest Heritage Insurance Services are not insured by the FDIC or any other Federal Government Agency, are not a deposit or obligation of, or guaranteed by Midwest Heritage, may involve investment risks, including possible loss of principal amount invested, and may lose value.