What is a Liability Umbrella and Do I Need One?

A liability umbrella is essentially a back-up insurance policy that protects individuals and companies against claims that are not covered by their primary insurance policies. With negligence lawsuits surfacing left and right, having a stable liability umbrella can protect you from having to cover the costs that your insurance policy falls short on. No matter how wealthy you are or how big your company is, the unpredictability of a court hearing judgment makes a liability umbrella essential to ensure your protection no matter what happens.

Because there are limits on the amount of insurance you can acquire through homeowners, auto, and watercraft insurance policies, umbrella insurance is there to extend your coverage when these limits are exceeded. Insurance companies will typically offer umbrella policy plans ranging from one to five million dollars in extra liability protection. However, this coverage can only be accessed when your current policies are no longer able to meet the cost requirements.

Every insurance policy has a liability portion that covers the costs resulting from an injury either on your property or through an auto accident. These costs can include lost wages due to the injury, medical bills, and rehabilitative therapy. Your liability portion would also be responsible for covering the defense's court costs, should the problem escalate to a legal level. It's easy to see how these costs can add up, especially if the accident caused more than just minor injuries. Because of these high costs and the strict limitations on the liability portion of your insurance, having a liability umbrella is essential for meeting heavy expenses. Without this policy, the state can even legally seize your personal assets to compensate for the excess expenses resulting from a lawsuit.

To avoid putting yourself or your business in this sticky situation, liability insurance is essential. It may seem like a big expense to tack on to your insurance policy at first. However, compared to the cost of medical bills and court hearings, it's just a drop in the bucket.