What are Personal Umbrella and Excess Liability Policies?

What is an Umbrella or Excess Liability policy?
Umbrella or Excess Liability policies offer higher limits of liability protection than what can normally be obtained under a Personal Auto or Homeowner policy. Typically this means you’ll have extra insurance protection to pay sums you’ll be legally obligated to pay if you cause a serious auto accident or your dog bites and seriously injures the neighbor child. Personal Umbrella or Excess Liability policies can be purchased in million dollar amounts anywhere from $1 to $5 Million dollars. The cost is determined by the amount of your exposure. Many companies have a base premium for one home and two cars and go up from there. Household drivers under the age of 25 will also impact the price of an Umbrella.

Not all Personal Umbrella policies are the same.
Some companies offer true Umbrella coverage whereby the policy not only provides Excess Liability protection over your primary home and auto coverage but also for many things not covered by one of these primary policies. In these situations, a retained limit (similar to a deductible) must be paid. Most Umbrella policies include a $250 Retained Limit.

Some companies offer Excess Liability protection that only “follows” your primary coverage. These policies generally provide excess coverage that kicks in only when coverage under a primary policy becomes exhausted.

Let me give you an example. It is fairly common while vacationing to rent a Boat or Jet Ski. Since Homeowner policies exclude Personal Liability coverage for “non-owned watercraft”, they offer no protection should you drive your rented boat or jet ski into the side of someone’s boat or even worse, cause serious bodily injury to a swimmer.

In the above scenario, an Excess Liability will not respond as there is no primary coverage available under the Homeowner policy. A true Umbrella policy however would respond and pay any defense and settlement costs that exceed the retained limit up to the Umbrella limit. It is important to know what type of policy you are buying for this reason.

Umbrella policies are not the answer to all your coverage problems but they do serve to fill the gap for most non-business related exposures.

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