Umbrella insurance: what does it cover?

Question

I'm specifically concerned with my wife's candle making craft.
She plans on selling a few candles to family and friends. Very small operation.
If one of these people burn their house down and decides to sue us because of a "faulty candle" (ugh .. the things you have to worry about these days!)
Would our umbrella policy cover it?

Answer 1

Likely not. There's a "personal umbrella" and a "commercial umbrella". The personal umbrella, if it's a TRUE umbrella policy (many are not these days, they're really "excess liability") has an exclusion on it for business activities. It doesn't matter how small the business is - it's a business activity. If the candle was a GIFT, then your homeowners liability policy would be covering it first. Of course, if it's a gift, then you don't have the same standard of legal negligence, either, and it's harder to be sued.

For a commercial umbrella, she'd need the underlying general liabiltiy policy first, and frankly, you'd have to sell a heck of a lot of candles to be able to afford the liability premiums.

You should be discussing your options with YOUR AGENT, though.

Answer 2

Your personal umbrella would not cover this type of exposure. If you wife is selling candles, she needs general liability insurance for her business. She then could get a commercial umbrella policy. But, sadly, your personal umbrella isn't going to cover damage caused by her candles...

Answer 3

She is operating a small business even though it sounds like she is doing it as a hobby. More than likely you won't get sued for this but should you, your personal general liability umbrella would not cover it. However I would say that you can probably call your agent and have them put a rider onto your policy to cover this for very little money.

Answer 4

Great Question.

First off you would want to check to see what types of coverages your policy has. An umbrella insurance policy is made to cover above and beyond what normal home, auto, or life insurance would provide.

A good site for types of insurance coverages is http://www.finance-your-life.com

It has an article on types of coverages that will help you understand exactly what umbrella insurance covers.

Happy Insuring =)

Dave

Answer 5

Without seeing your policy, it is a hard question to answer. Generally the Umbrella covers what the underlying policy covers. If it is attached to a homeowners' policy, there would be no coverage. What you described is a products liability claim.

Answer 6

Talk to your insurance agent - that is what they get paid a commission to do - answer your questions and have the authority to do so with regards to your policy.