Umbrella/Excess Liability Insurance

Unfortunately, accidents happen. And when they do, victims often try attempt to blame someone else. If there’s a great deal of loss or expense involved, the liability limits under your homeowners and auto policies may be exhausted quickly. Under the U.S. system of tort liability, courts can hold those found negligent liable for many different types of torts, such as bodily injury, trespass, and “personal injuries,” such as invasion of privacy, slander, libel, or damage to reputation. Your personal homeowners or renters policy may likely cover both the costs of your legal defense and any court awards for this type of claim, while your auto policy covers you for liability resulting from accidents that you’re involved in. Optional levels of typical homeowners policy facilitate from $100,000 to $500,000 in liability coverage, while your auto policy might facilitate as little as $25,000 per person injured and only $50,000 per occurrence (meaning per accident).

Enter the umbrella insurance policy. If you are found liable for causing serious injuries, the sky-high cost of medical treatment and other claims, such as negligence, loss of earnings, disability, replacement vehicle, rehabilitation, home modification, etc. could quickly exhaust the coverage limits on these policies. Once your underlying (home, auto, RV, boat, motorcycle, etc.) policy pays out its limits, any remaining liability costs become your responsibility. That’s where umbrella coverage kicks in.

Umbrellas normally begin at $1,000,000 of additional liability insurance, and have no limit, however most personal insurance companies offer terms up to $5,000,000 under certain conditions. Additional layers of coverage can be stacked to gain additional protection. Please know that persons that are employed in politics, have a history of being sued, have substantial net worth, are easily recognizable, whose names are known, whether their faces are identifiable or not can be targets of a high volume of lawsuits, so protection can be challenging to obtain.

Searching for options in advance of experiencing a claims situation is, of course, the key to securing affordable risk transfer devices (in this case actual policies of insurance) and retaining them.

Cost mitigation options are available, like deductibles, higher underlying levels of coverage, etc.

Coverage expansions are also available, like stretching umbrella not just over the policyholders’ liability, but also over the Uninsured/Underinsured Motorist Bodily Injury sections of the Named Insured’s risk. For example: If a client has $500,000 Combined Single Limits auto insurance, has a $2,000,000 umbrella, and has it extended over the Uninsured/Underinsured Motorist Bodily Injury section of their policy, and they are badly injured due to another party’s insurance who had only Oregon State minimum limits of Bodily Injury Liability of $25,000 per person $50,000 per accident, the other party’s carrier will normally issue payment for $25,000 and cease payments, but will simply close the claim, as their responsibility has been met, contractually. If the client suffered financial damages, including perhaps medical expenses, needs for temporary home modification, a home health care aide for a period of time, physical therapy, and three years loss of income at $100,000 each year after taxes, the clients’ own insurer is likely to fully pay for all of the financial damages suffered due in no part to the insured’s negligence. So while the guilty person’s insurance policy paid only $25,000 and walked away, millions could be recovered by the client’s own personal auto insurance and personal umbrella carrier.

To discuss options, obtain cost comparisons, and discuss conditions and limitations, please contact one of our agents.

But there are more benefits to umbrella insurance than just adding additional limits to your underlying auto, homeowners, and other policies.  Umbrella policies also drop down to cover you for things that your other policies may not cover, such as false arrest, libel, slander, and invasion of privacy.  For example, your homeowners’ policy will cover you if a guest sues you. But if a live-in resident, such as a nanny or even a non-immediate family member, sues you, that claim will be denied by your homeowners’ insurer. Your umbrella policy, however, will likely cover the claim.

The typical umbrella liability policy can facilitate an extra $1-5 million in additional liability protection for only a few hundreds of dollars per year. You can buy policies with higher limits if needed; generally, the more assets you have to protect, the more coverage you need.