An umbrella policy provides protection to the insured against losses that would exceed the limits of affordable primary coverage. An umbrella policy also insures against certain risks that a concurrent primary policy does not cover. As secondary coverage, it protects more than one property or asset with an extra layer of liability protection. In order to have a personal umbrella policy, you will be required to have home or renters insurance in addition to your auto policy and carry a minimum of $250,000 liability coverage on your underlying policies.
For example, if the liability limits are exhausted on your auto insurance, your umbrella insurance would take over and provide you with an additional protection up to the level of coverage you purchased. If you have $500,000 liability coverage on your auto policy and $1 million umbrella coverage, your total auto liability coverage is increased to $1.5 million.
Imagine if your dog were to bite a neighbor's child. Or if there's an accident on your rental property. Or a fire in your condo that spreads to other units. What would happen if you or a family member missed a stop sign and struck and killed a pedestrian? If any of these things happened to you, there's a good chance your current liability limits wouldn't be adequate to protect your assets--or your future earnings.
Personal Umbrella – This type of excess policy covers you, your household members, and drivers listed on your auto policy while in the pursuit of personal activities.
Commercial Umbrella - This type of excess policy covers your business; and covered employees while in the pursuit of business activities.
A true umbrella provides additional limits (as excess liability policies do) but also provides coverage not available in the underlying coverage. When additional coverage is provided by the umbrella policy, it is usually subject to the insured’s assumption of a self‐insured retention, or retained limit.
An excess umbrella provides coverage above the limits of the underlying coverage. It offers no broader protection than that provided by the underlying policy. In fact, the excess liability coverage may even be more restrictive than the underlying coverage.
A lot of factors determine the amount of coverage you need. Your financial status, lifestyle, and existing coverage are all relevant, but in liability lawsuits, a judgment could exceed your net worth. PFSI can provide expert advice and help you determine the amount of coverage that's right for you.