Umbrella Liability Insurance

What is it?

Umbrella liability insurance (also called personal excess liability) provides personal liability coverage above the amount provided by your auto and homeowners insurance policies. It also covers claims that aren't covered by those policies. These policies also include the additional defense costs when that coverage under your other policies runs out.

Why would you need it?

An umbrella liability policy protects your assets from lawsuits that exceed the limits of your auto or homeowners policy. It also protects your assets from risks that aren't covered by those policies. Here are some general examples of other risks:

Renting items such as snowmobiles, boats, all-terrain vehicles, golf carts, aircraft
Renting cars outside of the U.S. and Canada
Assuming liability when you sign a contract such as rental of tools or equipment or rental of facilities
Serving on the board of directors of a non-profit organization
Having a swimming pool or trampoline
Owning a dog, particularly a breed with a “bad” reputation
Having a fuel tank—such as heating oil, or propane—on your property

Is it expensive?

Umbrella liability is relatively inexpensive. According to the Insurance Information Institute, you can buy a $1 million personal umbrella liability policy for about $150 to $300 per year. Another $75 or so for the next million and $50 for each additional million.

Are there any requirements that must be met?

Yes. Your personal automobile, homeowners, and other personal policies must meet specific minimum liability requirements. Requirements vary by company but may be around $250,000 on your auto policy and around $300,000 on your homeowners.

Do you need it?

Everyone is vulnerable to lawsuits—no matter their net worth. Most of us don't believe we have enough assets for someone to sue us but that doesn't stop it from happening. Here are some things to consider:

Your current income and/or the value of your assets
What lifestyle activities have the potential for causing serious injury or death—such as hunting, fishing, playing sports, owning a swimming pool, or others?
Are you comfortable with your current coverage amount?

Only you can decide if you need an umbrella liability policy.

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