Umbrella Insurance

Umbrella insurance refers to a liability insurance policy that protects the assets and future income of the policyholder above and beyond the standard limits on their primary policies. It is distinguished from excess insurance in that excess coverage goes into effect only when all underlying policies are totally exhausted, while umbrella is able to "drop down" to fill coverage gaps in underlying policies. Therefore, an umbrella policy can become the primary policy "on the risk" in certain situations. The term "umbrella" refers to how the policy shields the insured's assets more broadly than primary coverage.

Most package policies provide a liability insurance limit of $1 million for any one loss and $2 million in any one year. For many businesses, this limit is inadequate for real economic security. As a result, additional layers of protection in million-dollar increments are readily available in today's insurance market for most businesses.

Umbrella insurance is designed to give one added liability protection above and beyond the limits on homeowners, auto, and watercraft personal insurance policies. With an umbrella policy, depending on the insurance company, one can add an additional 1-5 million in umbrella liability protection with umbrella coverage. This umbrella liability insurance protection is designed to "kick-in" when the liability on other current policies has been exhausted.

Umbrella insurance is actually very inexpensive. And since many people are realizing how much more money is being awarded in law suits now, knowing that they have extra insurance money from their umbrella liability to use if they are ever sued, they have found that the cost of umbrella coverage is small compared to the risk of not having the extra umbrella liability insurance.