An umbrella policy provides insurance protection above and beyond the limits of your existing homeowner’s, auto, watercraft or other personal insurance policies.  Umbrella insurance protects not only your existing personal assets, but future assets as well, like wages, an inheritance, or gambling winnings, should a claimant be awarded restitution against you. It also covers your legal defense.

Although many people believe that they are properly protected when they carry car or homeowner’s insurance, they are wrong.  These policies have limits of coverage, which may not be adequate in the event of a catastrophic incident. You don’t have to be wealthy to need an umbrella policy.

In today’s litigious world, a personal umbrella policy offers critical protection. It can protect you from paying out of pocket for another person’s medical or legal bills, once your home or auto policy limits are met. For instance, if you are at fault in a car accident that injures another driver, passenger or pedestrian, your personal auto insurance will cover the loss up to the limits of your policy. However, if the damages exceed your auto policy limits, you become responsible to pay the remaining damages personally, unless you have an umbrella policy.

An umbrella policy typically extends to other members of your household, such as your spouse, children and other relatives who live in your home and who do not have insurance in their own name. So, if your spouse causes a car accident or your teen is sued for posting a libelous comment online, your policy may help protect them as well.

Being a property owner comes with legal responsibility. Falling limbs from a large tree in your yard could damage your neighbor’s home or vehicle, leaving you responsible for any damage. Suppose you host a party in your yard and someone is injured. You may be liable for their injury, especially if it was due to your negligence.

It is almost impossible to prevent a claim against you, especially if the fault is due to your action or that of a family member. And it is impossible to predict the amount of money a claimant may be awarded, should it be deemed your fault. If you have a swimming pool, a trampoline, a tree house, an ATV or motorcycle, a dog, or host parties where alcohol is served, you need to protect yourself against the possibility of a loss. An umbrella policy is the answer to protecting yourself and your family from that type of exposure.

Because an umbrella policy is designed to be a form of secondary insurance, it will require you to have primary insurance coverage.  This means that you will have to own auto and homeowner’s liability insurance policies, as a condition of being approved for an umbrella policy.  The underlying insurance requirements vary by company, but typically require an; auto insurance bodily injury of $250,000 per person, $500,000 per accident with property damage coverage of $100,000; and personal liability of $300,000, as you would get from a homeowner policy.

An umbrella policy is designed to pick up where your auto and homeowner’s insurance policies leave off, and typically provide $1 million to $5 million in additional coverage. These limits can even go higher if you have significant assets to protect.

These limits of coverage may seem intimidating, but the cost of an umbrella policy’s annual premium is not as significant as you may think.  Depending on the coverage, a $1 million dollar policy can cost as little as $200 a year.

If you are just starting out, or have just graduated college, you are not absolved from needing an umbrella policy.  In the event that a court finds you liable for damages and awards benefits to a third party, your future earnings can be garnished.

It is important to consult with an independent insurance agent who specializes in personal property and casualty. During your consultation, you should review your physical assets, financial assets and lifestyle to identify the right coverage to protect you and your family.

Make sure your insurance agent is familiar with your existing policies to ensure there are no gaps in coverage and that it includes loss of wages for court appearances and legal expenses.

Umbrella policies will cover the excess liability in a lawsuit; however, you need to make sure the coverage picks up where your auto and home policies leave off.  If there is a gap, you can be responsible for that portion of the claim.

An umbrella policy attached to your personal auto or homeowner’s insurance will not cover lawsuits related to a business you own, however, commercial umbrella policies can be purchased to complement your commercial insurance policies.

Umbrella policies do not cover drag racing or any other high-risk uses of your vehicle.  And, may not cover all type of vehicles, such as recreational motor vehicles or vehicles over a certain weight, so it is important you understand exactly what you are covered for.

If you are concerned about being covered for a specific event that may not be covered under your existing policies, or that cannot be covered through an umbrella policy, ask your insurance agent about an additional policy that you can purchase to protect yourself.

In general, insurance provides protection from financial loss and responsibility due to an unfortunate emergency, accident or negative unforeseen event. Because we cannot predict the future, it is important that we take all measures to protect our home, family and assets.

Thomas Folise, President  –  5Borough Insurance Agency

(718) 766-8121