What is umbrella insurance? It’s supplemental coverage that kicks in when primary auto or homeowner’s insurance limits are exceeded. Despite its name and the broad range of liability an umbrella insurance policy provides, it isn’t the catch-all solution many people believe it is.
For utmost clarity and comprehension, understanding what isn’t covered by an umbrella policy is just as crucial as knowing what is covered. It’s unsafe to assume umbrella insurance addresses every pertinent issue. This assumption can result in financial distress down the road.
What Doesn’t Umbrella Insurance Cover?
Some of the most common exclusions in umbrella insurance are the following.
Personal Belongings and Property Damage
Umbrella insurance doesn’t cover damage to your personal belongings or your home. Those liabilities are typically covered by homeowners insurance.
Business Activities
If you operate a business, whether it’s a full-time operation or a side hustle, work-related liabilities aren’t covered. You can add a separate policy that covers business insurance.
Criminal or Intentional Acts
Umbrella insurance can’t protect you if you damage someone or something on purpose, or if you do so while committing a crime.
Contracts and Agreements
If you break a deal or sign an agreement that raises your liability, umbrella insurance can’t bail you out.
Why Do Umbrella Insurance Exclusions Matter?
While umbrella coverage gaps may not seem that significant, they can result in severe consequences when you assume something’s covered that isn’t.
For example, a small business owner might assume an umbrella policy covers damage to the storefront or inventory, but it usually doesn’t. That’s what separate business insurance is for.
Similarly, a car owner might assume that umbrella insurance will pay for property damages arising from an accident they are responsible for. Umbrella insurance can’t cover that — it only extends liability coverage limits. If the policyholder is not insured against collision, they’ll pay for the damages out of pocket.
Is an Umbrella Policy Right for Me?
Anyone who has assets they need to safeguard beyond their current policy limits can benefit from umbrella insurance. If you own a home or rental property, have a teen driver on your auto policy, frequently entertain guests at your home, or are a public figure of some kind, you may appreciate umbrella coverage.
Even if you’re not terribly wealthy, umbrella coverage can be a solution. Talk to your local agent to take a closer look at your needs.
How Does Umbrella Insurance Work With Other Coverage?
Umbrella insurance is the ultimate backup plan. It can’t replace a homeowners or auto insurance policy, but it can build on these policies after you’ve reached their payout limits.
For example, if you’re sued for $750,000 in damages from a covered car accident, but your primary insurance only covers up to $250,000, umbrella insurance could pay the remaining $500,000.
Remember that umbrella insurance only applies when your primary coverage has reached its payout limit. It won’t fill in coverage gaps you’re not already insured for.
Get Clear on Umbrella Insurance
The ins and outs of umbrella insurance can be tricky to navigate. Warrior Insurance & Services Group can help you determine your need for supplemental umbrella coverage. Contact us today to get a quote.