What is an umbrella policy?

Answer 1

Umbrella policy
Insurance for exports of an exporter whose issuer handles all administrative requirements.

Provides protection.

UMBRELLA POLICY BASICS
The Need for Umbrella Policies


There are many situations where a standard liability policy is simply not enough coverage. An umbrella policy allows an individual to protect himself against major lawsuits in two ways:



· The umbrella provides excess liability over underlying coverage; and

· The umbrella provides liability coverages that may be excluded by homeowners or auto policies.



Often referred to as a personal catastrophe policy, a personal umbrella policy, supplements the basic personal liability coverage provided under homeowners and auto policies. The umbrella was created to protect people from large losses.

Special Protection
Personal injury losses that may be limited or excluded under most homeowners policies will receive broader coverage under an umbrella policy. As a rule, personal injury does not have a uniform definition; however, most umbrellas will refer to personal injury to include bodily injury. Most policies also include in the definition of personal injury:



Mental anguish, false arrests, wrongful eviction, wrongful detention, malicious prosecution, invasion of privacy, assault and battery, slander, libel and defamation of character.

Standard Policies and Variations
There is no standard personal umbrella policy. The insurance coverages, as well as the exclusions, will vary by company. It is important to compare the costs against the coverage the policy provides. In some cases, it is more important to know what is excluded from coverage. Additionally, investigate what coverages and limits are required on the underlying homeowners and auto policies.

Coverages
Generally, an umbrella policy pays all of the covered loss that exceeds the limits of the base or underlying policy. If, for example, the basic policy paid $200,000 on a slip and fall injury and the claim was for $250,000, the umbrella would cover the $50,000 over the basic policy's $200,000 limit.

Deductible
Usually umbrella liability policies have two types of deductibles. These are also referred to as retained limits. Depending on the loss, one of them pays first before the umbrella pays. If the loss is covered by the underlying policy, that policy pays first up to its maximum limit and then the umbrella policy coverages are applied. Another consideration is that a loss may occur and is covered by the personal umbrella but not by an underlying policy. In this case, the insured must meet a deductible that is referred as the SIR, which stands for Self-Insured Retention. For example, a $1 million umbrella usually has a $250 SIR that the insured must pay before the umbrella coverage is applied.

Other Exclusions
Typically, the umbrella policy excludes losses that are better covered under other policies. Although there are differences, most umbrellas will not cover the following:



· Obligations under workers' compensation or similar laws. If a domestic employee is injured, coverage is afforded under workers' compensation and will not be duplicated under the umbrella policy.

· Damage to property owned by the insured. This precludes any coverage for property damage best insured under some form of property (homeowners) or inland marine (jewelry floater) insurance.

· Damage to property on which an individual agreed to provide insurance. The intent is to prevent the insurance company from paying for a loss that should be insured under some form of property insurance, especially since the insured has agreed to provide coverage.

· Disability arising out of a business pursuit - unless it is covered by homeowners or auto insurance. If a homeowners policy covers some business pursuits (i.e., an office at home), the umbrella will also extend coverage. Some policies also provide coverage to persons who are involved in civic activities, other than a person's regular employment, that may prompt lawsuits.

· Liability arising from rendering (or failing to render) professional services. This typically excludes malpractice, which is better covered by malpractice insurance.

· Liability arising from the ownership, maintenance or use of any aircraft. Such potentially catastrophic losses are excluded.

· Liability arising from the ownership, maintenance or use of watercraft not covered under the homeowners policy (subject to certain restrictions). The umbrella covers small boats that are typically afforded coverage under the homeowners policy; however, large watercraft are excluded because of the increased liability risk.

· Liability covered by a nuclear energy policy. Nuclear energy policies contain a persons insured or "omnibus" clause that encompasses virtually everyone who may be responsible for a nuclear accident, barring only the U.S. government. If a person should become involved in a nuclear incident covered by a nuclear energy policy, such a person would be covered by that policy and would not need protection under the umbrella. Therefore, coverage is excluded under the personal umbrella policy.

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Answer 2

An umbrella policy is a policy that goes "over" another liability policy, such as auto, homeowners, business liability, workers compensation, giving you additional limits in increments of $1,000,000, and in some cases, covering losses that aren't even covered under the primary (policy underneath) policy.

It does NOT cover "everything", but in the traditional form does broaden coverage.

It's useful for protecting your assets, or the assets of a business.

Answer 3

Legal Definition:
Insurance that extends your coverage beyond the limits of your basic insurance policy.
Translation:
Insurance that kicks in once you've reached the limit of your basic policy. For example, if you suffered a $1 million dollar loss, and your property insurance covers $500,000, an umbrella policy could cover the remaining $500,000.

Besides raising monetary limits, umbrella policies often provide coverages that aren't included in the more basic policies.

Answer 4

an umbrella policy is a liability policy that extends the liability coverage on your homes, autos, boats, etc to a higher limit
usually to $1,000,000 or $5,000,000 or whatever amount you need

Answer 5

An umbrella policy provides coverage in addition to your other personal (or commericial if you've purchased a commercial umbrella) insurance, like your homeowner's/renters, fire/rental, contents, auto, watercraft, motorcycle, recreational vehicle etc. Each of these policies has a "liability" limit, which is the maximum amount the insurance company will pay out. For purposes of explanation, let's use your auto liability limits since most umbrella losses involve auto coverage.

Most companies will require that you carry 100/300/100 or 250/500/100 liability limits. This means the company will pay up to $100,000 per person per accident up to a total of $300,000 for bodily injury liability and an additional $100,000 for property damage. For 250/500, the company will pay up to $250,000 per person up to a total of $500,000 per accident for injury and $100,000 for property damage.

For example, let's say Jane Public is in a car accident; she falls asleep at the wheel, crosses the center lane, hits another car head on and then crashes into three parked cars. She has three passengers with her and there is a family of five in the car she hits head on. Let's say Jane seriously injured three people in the accident, totaled her vehicle as well as the one she hit head on and did a fair amount of damage to the parked vehicles. The average cost of being in the ICU for one day is $5,000; tack on to that doctor's fees, tests, meals etc, and the cost adds up very quickly. I've seen plenty of ICU stays exceed $20,000 a day.

Let's say the total cost of the accident is $650,000.
- Vehicle repairs - $110,000 (Jane would be responsible for $10,000 already since her policy limit here is $100,000).
- Bodily Injury - $220,000 (her policy limit is $100,000 per person, but let's say one of her passengers incurred $160,000 in medical bills, Jane has another $60,000 in liability to pay in this case)
- Long-term medical care, compensation for pain/scarring - $320.000 (this covers disability, lost wages, scarring, future medical treatment etc,). Jane is out of money for one of the folks, so another $175,000 is coming out of her pocket for this cost too.

That's a total of $260,000 her auto policy didn't cover. However, had she purchased umbrella coverage, the $260,000 would have been paid for her. Umbrella policies are often called "excess liability" coverage. They pick up the cost of claims that are in excess of your underlying-policy limits.

Without getting really technical here, I'll just say that umbrellas are one of the best (and cheapest) coverages you can purchase for yourself. The average family can purchase $1,000,000 in coverage for under $250 a year. Underwriting is pretty tight with them; they usually won't provide this coverage if you've had a large liability loss, a major driving violation (like a DUI), or if you have a lot of violations on your MVR. If you have assets to protect, purchase this coverage for your family. The example I gave above happens every single day. Don't fall into the trap of "It'll never happen to me." I see that every day too -- folks who have a loss and then want to purchase umbrella coverage when it's too late.

Your umbrella policy will coverage over many different types of losses, even providing legal defense as needed. If you're thinking of purchasing it, get a true umbrella and not a pure "excess liability" policy. Your local independent agent will be able to help you select the best carrier and underlying limits.

Answer 6

it is an insurance policy that cover you auto insurance, homeowners/renters insurance and other types of insurance under one policy.

Answer 7

It covers everything.