The primary insurance policy on your auto or home covers most accidents that might take place. However, once these policies have reached their limits, it’s up to you to pay the difference.
What if your claim exceeds your coverage limits? What if someone is critically injured, or dies, and you are sued? What if the accident isn’t covered by your policy? Umbrella coverage could make an already unfortunate situation, even worse.
What is an Umbrella Policy?
An umbrella policy is insurance that offers coverage above and beyond your primary policies. In the event of injury, death and/or property damage, once the limits of the primary insurance policies have been reached, an umbrella policy will kick in to pay up to its own determined limit. An umbrella policy can also pay for damages not covered in your main home or auto insurance policy.
Though some sources might use the terms “umbrella coverage” and “excess insurance” interchangeably, they aren’t quite the same. Excess insurance policies cover precisely the same losses as your primary policy, except that they “cover the excess” of a successful claim should the award to the victim be greater than your limit. Umbrella policies, however, may offer coverage for incidents not included in your primary policy’s coverage.
Supplementing Your Homeowners Policy
Homeowners policies won’t cover damages for all accidents or disasters. Please read each potential policy for specific exclusions and inclusions. Additionally, each policy has a maximum limit for how much it will pay out for an accident.
A typical homeowners policy provide $100,000 to $300,000 in personal liability coverage. This covers a range of potential injuries and events. Depending on how high your limit is, the insurance policy will pay up to that amount in total per accident. If the losses run higher than that, though, you could be responsible for paying the rest out of your own bank account. Umbrella coverage could increase your maximum limits to $500,000 or more, depending on the umbrella policy you choose to purchase.
Supplementing Your Auto Policy
While Minnesota is a No-Fault State, when traveling outside of state, that is no longer the case, and you may find yourself on the hook for damages in excess of your policy limits. There are also situations where you may be sued for damages beyond PIP limits. For this reason, you may want to know that an umbrella or excess liability policy would coordinate with your car insurance as well.
Are You At Risk for a Big Claim?
There are some things that can increase the chances that you’ll need an umbrella insurance policy. If your commute is long or it occurs at rush hour, you could be more likely to need to file an auto insurance claim. If you own a dog or have a pool, you’re more likely to need to file an insurance claim for your home. And if you’re a social butterfly with frequent house guests, that may also be a risk.
Umbrella Insurance Requirements
Keep in mind that umbrella coverage is not intended to be a first line of defense. By definition, it is a secondary form of insurance. Your primary insurance will have to fulfill certain requirements before you can purchase an umbrella policy. Though underlying insurance requirements vary, some typical insurance coverage requirements might be:
- $500,000 home insurance personal liability coverage
- $100,000 per accident for auto insurance property damage
- $250,000 per person/$500,000 per accident auto insurance bodily injury coverage
That’s your basic introduction to umbrella coverage. And it can supplement more than your homeowners and auto insurance, it can also expand coverage for your ATV, RV, boat and other insurable vehicles. If the extra coverage of an umbrella policy sounds right for you, talk to your insurance agent.