A male, female couple standing in front of their house embrasing each other helping to convey peace of mind knowing the assets they've worked hard for have an extra layer of protection. The house has a modern build, two stories, white stucco with a red brick entrance and modern brown color door with four glass section that run horizontally up the front. The male is wearing a blue denim long sleeve shirt and the female is wearing an off-white knitted sweater.

Umbrella Insurance

An Excess Liability policy also referred to as an Umbrella Policy provides extra liability coverage in the event that a covered loss on one of your other policies is exhausted and additional liability coverage is needed. The term Umbrella is used because this type of policy is available for nearly all covered losses from your other policies as long as you have listed the underlying policy in your Umbrella Policy, and as long as the underlying policy liability limits meet the minimum required by the Umbrella policy.

Excess Liability Umbrella Insurance

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Requirements For A Personal Umbrella Policy

Any underlying policies you have such as your auto insurance, and homeowner's insurance must be set to a certain liability limit, usually $500,000, but this varies by carrier sometimes going as low as $300,000. As an example, if you have an auto policy with a $100,000 liability limit, that policy would not be eligible for umbrella coverage even if you already have an umbrella policy - or if you lowered the underlying limits without notifying your umbrella policy carrier. Therefore, the auto policy limits must be changed to meet the umbrella’s requirements of a $500,000 limit. The same is true for homeowner’s or any other policy that you would want the umbrella to pick up coverage for.

Excess liability policies start at $1M in extra coverage and can go into the multi-million range based on the customer's financial needs, and if other requirements such as age or existing loss history are met.

Why Purchase an Excess Liability Policy?

Individuals who have created a significant financial portfolio either liquid or by assets purchase an excess liability policy to protect those assets. This is necessary because if you you are legally liable for bodily injury, or other types of liability and your existing policy limits are depleted, the party you are responsible for paying can file a personal lawsuit in court that can require you to liquidate your assets or payout of whatever liquid assets you have to pay those liability requirements. Adjudication can go as far as court ordered wage garnishment - where a portion of your paycheck is taken by the court and used to pay your liability.

An excess liability policy helps by standing between your depleted underlying policy and your personal assets. If you personal assets exceed your underlying liability amount(s) we would usually recommend an umbrella policy.

How A Personal Umbrella Works

Here is an example of how an umbrella policy works. Let’s say you have an auto policy that covers up to $500,000 for bodily injury liability, and an umbrella policy for $2M. If you were at-fault for an accident and the vehicle you hit had five passengers in it, and all five people sustained major injures requiring extensive medical care. Your insurance receives a bill from the other party’s insurance company for $1.2M. Your underlying auto policy will be exhausted, paying your auto policy liability limit of $500,000 toward those medical bills. Now you have an outstanding amount of $700,000. Without an umbrella policy litigation could begin, and that money would be recovered through lawsuits that could take any number of your assets including your liquid assets and physical assets like your home. However, in this illustration you have the $2M umbrella policy, so additional litigation would not be required and your umbrella policy would pickup the remaining $700,000 in liability payment.

This isn't always how it would work, because there may be other coverages available to the party not at-fault such as underinsured motorist, and health insurance but, not everyone carriers underinsured motorist or health insurance.

Personal Umbrella Policy Exclusions

While an umbrella policy is designed to cover many popular exclusions of underlying policies, there are a few standard umbrella policy exclusions such as:

Intentional Loss (fraud)
Losses sustained in business pursuit
Catastrophic losses such as war, nuclear disaster, etc
Persons of high profile, such as actors, music artists, politicians, etc