FAQ Series: Umbrella Insurance – What is it and do I need it?
Umbrella Insurance – or Personal Catastrophize Liability – is an additional policy you can purchase that will provide additional liability coverage on top of your auto and/or home insurance policy. Usually, they are purchased in liability coverage increments of $1 Million. An Umbrella does not provide more coverage to the property itself, but will provide additional liability coverage if there is an accident or personal liability claim that exceeds the limits of your underlying auto/home policies. Umbrellas are imperative to have if you are in a higher risk class, or have a large amount of assets to protect.
For instance, some financial professionals would suggest you have an Umbrella to cover 1-2X your net worth. Umbrella’s can typically run between $150 and $1,000 depending on how many millions of coverage you require. Some refer to this as “lawsuit insurance” as umbrella policies typically pay out when there is a lawsuit over a liability claim and the plaintiff is awarded more money than exists on their underlying personal lines policies.
Umbrellas are not only used in Personal Lines. There are also Business Catastrophe Liability (BCL’s) policies that can serve the same purpose for businesses. Typically, an insured should purchase their umbrella from the same company that insures their underlying policies to get the best pricing available. Insurance companies typically surcharge to put an umbrella over another companies underlying policies.
If you have more questions or need assistance with an umbrella policy. Please don’t hesitate to contact us!