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Umbrella Policy - What is it?

2015-09-17 10:42:00

Society has changed over the last couple decades to alter our mindset that the normal reaction is to sue someone that does something to you. It’s crazy, I know, but it happens more and more.  However, the insurance industry came up with a solution to protect you from paying huge amount out of your pocket on large claims. Yup, you guessed it, an umbrella policy.

Umbrella Insurance

An umbrella policy is a totally separate policy NOT a coverage added to an existing policy. This separate policy provides liability limits in excess of limits on other policies. An umbrella policy also can provide coverage for losses not covered by the other policies. For example,* a high school student hated math class and her teacher. She made several “damaging” and false remarks about her teacher on Facebook. The teacher sued the parents for personal injury and $750,000 was paid.

Examples of liability that an umbrella policy may cover that a homeowner's policy often excludes are below.

Umbrella policies are sold in increments of $1,000,000. Because the umbrella policy goes into effect after the underlying coverage is exhausted, the annual cost is inexpensive ranging from $125 to $300 a year. Premium depends upon how many homes, cars or toys you have. Most insurance companies require you to have a certain limit on your other policies before you can purchase an umbrella liability policy for additional coverage.

Claim Examples*

  • A woman permitted several of her children and their friends to play paintball in her large back yard. The children were experienced and advised of all the safety rules including the use of headgear at all times. A participant removed her headgear as she was leaving the field in order to better hear someone calling her name. The girl was hit in the eye and her parents sued resulting in a $575,000 settlement.
  • An 18 year old was driving on a short trip to the store with his girlfriend. He lost control of the car and struck a tree. His girlfriend, a 19 year old college student, was hospitalized for over a month with multiple fractures and internal injuries. She has problems walking as a result of the injuries. The boy’s parent’s personal umbrella policy paid $2,000,000 for her injuries.

Need a quote? Insurance can be really complex. Don’t do it alone. Call our office at 701-237-6414 and ask for Denise, Becky or Janice. You can also email info@warnerandcompany.com


*Examples provided by an insurance company partner