Umbrella Insurance: What it is, and Why You Need It

Megan Simonsen | Aug 17, 2022

Don't get caught without umbrella insurance! Umbrella insurance works just like an umbrella to shield you from unexpected showers. Unfortunately, many homeowners and property owners don't even realize it may be something they need. That's why we're diving into what umbrella insurance is, and why it's important in this article:

What is Umbrella Insurance?

Just as an umbrella shields you from the rain, an umbrella insurance policy shields you and your personal assets from large liability claims.

An umbrella policy functions on top of your existing insurance plans. Let's say you have a property insurance policy on a rental property. Your property insurance provides a certain amount of coverage based on the types of damage. But, if the coverage your property insurance policy offers runs out, then the umbrella policy can kick in and help cover additional costs. 

Umbrella insurance usually provides liability coverage for personal liability situations, certain lawsuits, injuries, and damage to property. 

Do I Need an Umbrella Policy?

Insurance is expensive as it is. Many property owners don't want to consider taking out an additional policy unless it is absolutely necessary. That said, umbrella insurance can provide valuable protection against costly potential damages, and it's relatively inexpensive. There are some situations where it's a beneficial purchase.

For example, let's say a house guest suffers an injury at your home. Your homeowner's insurance will provide some personal liability coverage to help you pay for that person's medical bills. But what if your homeowner's insurance policy has a limit of $500,000, and the person's medical bills cost $750,000?

This is where that umbrella policy kicks in. Umbrella coverage takes effect after the limits of the underlying homeowner policy has been reached, and can cover that outstanding cost of $250,000. How much the umbrella policy covers will depend on the coverage level you select. 

Who Purchases Umbrella Insurance?

There are a few common situations where property owners supplement existing insurance policies with umbrella policies, including when you:

  • Own a swimming pool or trampoline
  • Own a business
  • Participate in adventurous activities, like skiing, surfing, or hunting,
  • Own investment properties
  • Own a business
  • Own a dog

And more. 

In general, umbrella insurance is favored by those who consider themselves at greater risk for a lawsuit or accidental injury. For example, in the case of a dog, you as the owner are responsible in the event that the dog harms anyone. Umbrella insurance can help ensure that if that ever happened, you would have protection from potential lawsuits. 

Umbrella Insurance Helps You Prepare for a Rainy Day

There are situations where a standard liability policy may not provide enough coverage. An umbrella policy allows you to protect yourself against major lawsuits in two ways:

  • First, the umbrella provides excess liability over underlying coverage. 
  • Second, the umbrella provides liability coverage that may be excluded by your homeowner’s policies.

If you have additional questions about umbrella insurance policies, or if you're worried you're not getting the coverage your policy was supposed to provide, get in touch with The Lane Law Firm. Our insurance dispute attorneys are here to help. 


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