What does a personal umbrella policy do?

A personal umbrella policy acts as excess liability coverage for auto, homeowners, recreational, and renters insurance. It helps protect your assets against lawsuits when the liability limits in your primary policies have been exhausted. It covers liability and defense costs above your primary policy. It does not cover physical property damage losses.

Why might you need one?


In Michigan, the new auto insurance reform has made it easier for you to be sued. There are many occurrences that used to be off-limits but are now targets. For example, it is possible you can be sued for other people’s medical bills— that was not the case before since all medical bills were paid in full under the no fault law. Medical bills may not be paid in full if the person you injured did not purchase full medical benefits. Another auto example: What if you seriously injure a surgeon and he can no longer perform surgery? How much do you think that lawsuit will be? Loss of income can be very expensive. Do you have a teen driver in the house? The crash risk is approximately 3 times higher for 16-19 year-olds and they account for 8-10% of fatal crashes. This creates high risk and high liability for you. What if someone is badly injured on your property? Suppose someone falls down the stairs, gets hurt on a trampoline or in a pool. Typically this is covered by your homeowners policy—but what if the cost is above your limit? That is where the umbrella may offer additional coverage. Do you own a boat? If someone is injured, a boat policy would typically cover this. If the loss goes above the policy limit, an umbrella may offer you additional coverage. People often say, “I do not own anything, so what can they sue for?” One thing that people forget is their ability to earn an income. Courts have garnished wages from lawsuits. Can you afford to lose $100 per week for 20 years? That amount is what you might be obligated to pay for even a small judgment of $100,000. An umbrella can help by giving higher limits to cover higher losses.


How much do they cost?

The cost depends on how many cars, homes, teenage drivers, boats and toys that you have and also how much coverage you would like. For a typical person with two cars, a home, and no young drivers, an average price for $1,000,000 coverage is between $200—$300 per year.

More from our articles

What does a personal umbrella policy do?

A personal umbrella policy acts as excess liability coverage for auto, homeowners, recreational, and renters insurance. It helps protect your assets against lawsuits when the liability limits in your primary policies have been exhausted. It covers liability and defense costs above your primary policy. It does not cover physical property damage losses.
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