Many people may have heard of “umbrella” insurance, but probably don’t know what that term really means. For starters, it does NOT mean that you have purchased additional insurance to “protect your umbrella.”
An “umbrella” insurance policy (or sometimes referred to as “excess coverage”) is additional insurance coverage that protects you and/or your family with coverage that is over and above the limits of insurance of any applicable home, auto, or watercraft insurance you may have in place. It provides an additional layer of coverage, not only to those who are at risk for being sued for damages caused by your negligence, but more importantly, some umbrella policies will also protect you and your family from catastrophic injuries caused by the negligence of another.
What does this mean? Let’s look at some examples.
Example No. 1. If you carry homeowner’s liability insurance on your house with $100,000 liability limits, and someone suffers a severe injury on your property due to your negligence, your homeowner’s insurer will only protect you up to the $100,000 policy limits. The injured person however can still try to collect any damages over that amount from you personally. If you carried a $1 Million Dollar Umbrella Policy, you would be protected up to $1,100,000.
Example No. 2. If you and/or your family are hit head-on by a drunk driver who only carries the minimum auto liability coverage of $30,000, or even worse, is not insured at all, you and your family would have an “underinsured” (UIM) or “uninsured” (UM) motorist claim against your own auto insurer for damages over and above any coverage carried by the drunk driver. Although the minimum UIM or UM coverage in Minnesota is $25,000, you certainly have the right to purchase higher coverage for these claims, although most drivers do not buy more than $100,000 coverage for UIM or UM claims. Even so, given this scenario, the most you would be able to recover would be $130,000 ($30,000 liability coverage and $100,000 UIM/UM coverage). If you or your family suffers any serious injury however, this simply may not be sufficient to fully compensate you. A $1 Million Dollar Umbrella policy could increase any potential coverage and recovery by that amount.
As you can see, an Umbrella policy is not just purchased to protect you from the claims of another, but also to protect and compensate you and your family when you have been the victim of someone else’s negligence. The cost of purchasing this additional coverage is usually far cheaper than if you simply increased the underlying coverage itself. The reason is because most claims can usually be resolved within the limits of the underlying coverage. Consequently, there is a smaller likelihood that a claim would ever be made against this excess policy….hence the reduced cost. If you want additional protection for you and/or your family, we highly recommend you talk to your insurance agent about purchasing an “umbrella” policy of insurance.
If you have any questions about insurance coverage for an injury, call the knowledgeable attorneys at NELSON PERSONAL INJURY, LLC. As always, all consultations are free.