Umbrella Policies

What is an umbrella policy?

Umbrella policies are basically an excess liability insurance policy. It provides extra liability protection for damages you cause to other people’s property or injuries to others caused in an accident. If you end up in court due to a lawsuit, your home, auto, recreational policy liability limits will cover court costs and damages. However, once those liability limits are exhausted the umbrella policy will step in and cover any additional damages incurred.

You may be asking yourself “when or why should I consider getting liability insurance?”

Some reasons you should consider getting an umbrella policy are listed below:

  1. You have a swimming pool. If your guests have a life-changing injury or death they will most likely sue you to cover the cost of their injuries. Your homeowner’s insurance will cover up to your liability limits on that policy, and the umbrella policy will cover the cost beyond those limits such as more expensive long-term care needs to the injured party.
  2. If you have a teen driver. Teens are becoming more and more distracted these days due to cell phone use and texting while driving. Teen crash rates are three times more likely to occur than drivers ages 21 and over. If your teen causes serious harm or death to another individual or individuals, most likely your auto liability coverages will not suffice and an umbrella policy will cover the extra cost of damages incurred.
  3. Personal injury protection. These may include social media comments you or your children make that may cause harm to another person. You could post a bad online review and that business could sue you for loss of business. Or your kid decides to spread gossip, rumors, or inappropriate pictures of a classmate and their parents sue everyone involved. These types of scenarios are all too commonplace these days and most people are not prepared for the consequences.
  4. Entertaining at home. Parties at your home that cause injuries such as slip and falls expose you to getting sued. Also, Texas Social Host Law states the following “The Texas social host law is in Section 2.02 of the Texas Alcoholic Beverage Code holds party hosts liable in two circumstances: if the hosts knowingly serve alcohol to minors on their property, or if the hosts supply car keys to an intoxicated adult on the host’s property. The law requires knowledge by the host of the minor’s age. Without actual knowledge of the minor’s age, a party host will not be liable so long as the host’s assumption is reasonable.”
  5. You have a long commute. If you drive frequently or have a long commute the probability of getting into an accident greatly increases. In 2018, 40,000 people died in car crashes and 4.5 million were seriously injured according to the National Safety Council. If you cause serious injuries to others the umbrella policy will cover their losses such as the court costs, medical expenses, lost wages or earnings, and pain and suffering.
  6. You own a dog. Everyone likes to think their dog will never bite anyone, but the sad statistic is that dog injuries occur every day – even from breeds not considered dangerous. Any dog can cause harm without a warning towards any person which can result in severe injuries.
  7. You have a second home. Because second homes are not occupied at all times, the greater your liability exposure becomes on that property. This is especially true if the second home has a swimming pool or hot tub that may lure uninvited guests over while you are not present in the home. If the uninvited guest gets hurt, in many cases the liability still may fall on you.
  8. You need to protect your hard-earned assets. Owning a large amount of assets (cash, multiple homes, etc) exposes you to a greater chance of a financial catastrophe. If you get sued and your underlying policy liability limits do not cover all expenses you will have to pay out of pocket for all damages, and/or your assets could be seized.
  9. You own recreational vehicles, boats, ATVs. Owning high-risk vehicles such as boats, RVs and ATVs is fun but can also be dangerous that can cause serious harm to others. You want to ensure you have enough liability coverage when operating these vehicles.

An important thing to remember regarding some umbrella policies is they may only provide excess liability coverage if your underlying policies already provide that specific liability coverage. For example, a lot of home insurance carriers do not provide animal liability coverage for certain breeds and/or may exclude all dog liability. If your homeowner insurance policy has no animal liability coverage and your dog causes serious injury to others, then your umbrella may not provide that coverage either. Always confirm the coverages you have in your underlying policies and check with the umbrella policy to see if they provide coverages not included in your existing policies. This rule can apply to ATV, boat, recreational vehicles, etc.