When regular liability insurance just isn’t enough to cover your responsibility for damages related to an accident or incident, excess liability coverage – the so-called “umbrella policy” – can help to protect you from major claims and lawsuits by providing liability coverage beyond the limits of your homeowners or auto policies.
Generally, umbrella policies are available in increments from $1 to $5 million, available after you’ve met your insurance company’s primary liability limits. Some umbrella policies also cover lost wages and attorney costs, and will protect you even if you travel out of the country.
Why Regular Liability Insurance Isn’t Always Enough
As you earn more and acquire assets, your risk increases, along with your need for greater protection. Liability insurance specifically provides coverage when you or a family member are responsible for someone else’s personal or property damage. Most homeowner’s insurance policies provide a minimum $100,000 in liability coverage, and auto insurance policies provide $25,000 per person and $50,000 per accident, although this varies by state. While you can purchase higher limits, these are capped at $500,000. In a litigious world, it simply may not be enough.
Imagine your neighbor trips over your puppy and breaks his hip. Your homeowner’s policy would cover the first $100,000 in property damages and personal injury, but what happens when you are sued for costs beyond this amount? Keep in mind that “property damage” is defined as accidental damage to the property of others caused by you (your family member, your pet, etc.), whereas “personal injury” defines many scenarios, from bodily injury, shock, and emotional or mental distress, to sickness, disease, or death, and even extends to such predicaments as false arrest, detention or imprisonment, malicious prosecution, wrongful entry or eviction, humiliation, libel or slander, defamation of character or invasion of privacy.
This is where the umbrella policy comes into play, increasing your personal liability limits and adding other protections usually not covered in the typical homeowner’s policy, including:
- Protection for covered claims others may make for personal injury or property damage caused by you, a household member, a pet or other hazards on your property
- Personal liability coverage – whether damage or injury occurs on or off your premises
- Extra protection against auto-related liabilities, above your primary auto policy
- Protection against non-business related personal injury liabilities – slander, libel, wrongful eviction, false arrest
- Legal defense costs for a covered loss, including lawyer fees and associated court costs
- Worldwide coverage- (exception: situations involving foreign ownership of dwellings or cars)
How Much Coverage Do You Need?
The answer to this question varies. Factors for consideration include the value of current assets you wish to protect, the value of future assets, your lifestyle risks, the ages of your children (specifically, whether they are driving) and other items.
Considering buying excess liability insurance in Missouri? Get sound advice from a source you can trust: Quinn Estate & Elder Law.