Understanding Umbrella Insurance: Why You Need It

What is Umbrella Insurance and why do you need it?

If you’ve ever heard the term umbrella coverage, the first idea that might have popped up in your mind was insurance that protects you on a rainy day. That was a good guess, but when it comes to purchasing an insurance policy, umbrella coverage has very little to do with an actual umbrella.

But what exactly does personal umbrella insurance mean? How does it work? More importantly, do you need it?

Here we’ll answer the common questions about umbrella insurance, and we’ll give you some common scenarios where umbrella insurance is very useful.

What is personal umbrella insurance?

Personal umbrella liability insurance policy provides higher liability limits in excess of the primary liability limit covered under your current home, auto, seasonal residence, recreation vehicle etc. insurance policies.

We will outline what personal umbrella insurance covers and what it does not next.

What does umbrella insurance cover?

Here is a typical scenario where a personal umbrella liability insurance will cover an incident.

You have home insurance that covers you up to a certain amount of liability coverage. However, at one of your summer pool parties, someone slips and injures their ankle on the swimming pool deck in your backyard.

If the insurance policy deems you responsible for the injury to the individual and damages awarded goes over the limit of liability covered under your home insurance policy umbrella insurance steps in and covers the excess.

It’s important to state that personal umbrella liability policy insurance falls under the category of personal insurance and cannot be applied to any business venture. To have higher limits of liability on any business venture, you will need a business umbrella liability policy.

Who should purchase personal umbrella insurance?

As a general rule of thumb, having insurance works as a safety blanket for anyone who purchases an insurance policy. However, umbrella insurance works as an added layer to your current policy that provides liability coverage.

As unexpected circumstances can occur at any moment, it’s impossible to predict when an accident can happen where a lawsuit ensues. Lawsuits incur fees that include out-of-pocket expenses for lawyers and court fees.

Having umbrella insurance helps protect you from lawsuit fees. An umbrella policy is a practical solution to give you peace of mind. It ensures that if anything unexpected should happen, you will have sufficient liability coverage.

Everyone can benefit from umbrella insurance, but examples of individuals who participate in activities that could increase their chances of being sued and should consider purchasing umbrella insurance:

  • Landlords renting out their cottages, condos, and vacation homes
  • Homeowners with swimming pools, trampolines, jungle gyms, boats and several pets
  • ATV, motorcycle, canoes, yachts, and snowmobile owners
  • If you rent vehicles in other countries

What are some typical scenarios personal umbrella insurance covers?

To give you a better idea of how umbrella insurance works, here are some typical scenarios that can happen where umbrella insurance will come in handy.

  1. Car accident coverage

    If you get into a car accident and the liability award exceeds your primary liability coverage limit, an umbrella policy will cover the increased liability limit.

  2. Pet injuries

    If you have a dog or exotic animals and someone visiting your home were to be bitten or injured by one of your pets, umbrella insurance will provide additional liability limit over and above the liability limit covered under your habitational policy.

How much coverage is available for personal umbrella insurance policies?

Umbrella insurance coverage limit that one should purchase depends on one’s individual circumstances i.e. one’s assets, lifestyle, etc. Typically, policies start at $1 million of liability coverage and can be purchased up to $5 million. You should discuss different coverage rates with your insurance broker.

Where can you purchase umbrella insurance?

As you can see, umbrella insurance covers a broad range of situations that could happen to just about anyone. A great way to think of this type of insurance policy is if your boats, ATVs, homes, cars, seasonal homes, travel etc.

For more information about umbrella insurance policies, call Bow Valley Insurance at 1-800-332-1308 or contact us here.

* Coverage is subject to policy wording, terms, conditions, and deductibles. Protection is limited to the perils, coverage, exclusions, and limits shown on the policy.