From an accidental kitchen fire to a burglary while you’re on vacation, homeowner’s insurance helps cover your most precious assets against these and other dreaded scenarios.
But did you know that homeowner’s insurance also covers you for personal liability?
You could incur personal liability if you accidentally cause damage to another person. Typically, your homeowner’s policy provides liability limits up to a certain amount, usually ranging from $100,000 to $500,000.*
If a judgment exceeds that amount, though, your personal assets could be at risk. Without extended liability limits, a single lawsuit could easily wipe out your savings, your personal assets, and even put your home at risk.
That’s where an umbrella policy comes in.
Umbrella insurance is exactly what it sounds like – an overarching policy, which pays damages when the liability limits of your homeowner’s or auto policies are exhausted. In certain cases, it even provides “drop down” coverage to protect you from liability not covered by your home or auto policies.
Liability in Your Home and Beyond
It’s common knowledge that we live in a litigious world. Many people fail to realize that they could get sued for a number of things, both on and off-premises, including:
- A guest slips and falls near your pool
- A child gets injured jumping on your trampoline
- Your child’s friend gets ill from food you serve at a party
- You take your dog for a walk and it bites your neighbor
- Your teenage driver gets into a serious car crash that injures someone
- You posted a scathing review online, which might be viewed as libel
- Your rental car is involved in an accident while you’re on vacation
To better understand how umbrella insurance works, it may help to think about where the liability limits on your homeowner’s insurance end and where the umbrella limits begin.
Let’s say, for example, a guest slips and falls on your icy driveway and sues you for $700,000. Assume that your homeowner’s insurance policy provides maximum liability limits of $300,000. If your guest wins a $700,000 judgment against you, you would have to pay $400,000 out of pocket.
Umbrella insurance comes into play when the liability limits on your homeowner’s insurance is maxed out. In this situation, it could cover the remaining $400,000.
Added Benefits of Umbrella Insurance
- Umbrella insurance offers broader liability coverage in certain circumstances than your homeowner’s policy. For example, unlike most standard homeowner’s policies, it covers you if you’re sued for libel, defamation, slander, or wrongful eviction. Here are some real-life scenarios, where having an umbrella policy may help:
o Let’s assume you left a negative review for a home contractor online. Like it or not, there’s a possibility that you might get sued for defamation (which usually isn’t included in the liability coverage in a standard home policy). In such a scenario, an umbrella policy could be critical, helping you cover litigation costs and/or any damages awarded against you.
- An umbrella policy does more than just cover you at home -- it covers you for liability anywhere in the world. So, if you accidentally injure someone when you’re driving overseas, you most likely would be covered by your umbrella policy, regardless of where the incident took place.
It’s a common misconception that umbrella policies are just for the wealthy. If you own a home, have retirement savings and investments, you too can’t afford to lose everything you’ve worked so hard for because of a lawsuit.
But how do you know for sure? Find out if you Need Umbrella Insurance. Or call us at 858-487-9200 for more information about adding a Personal Umbrella policy to fill gaps in your insurance coverage.