Umbrella insurance: 15 of the most common questions answered!

February 23, 2021

To help you with your research, we've answered 15 of the most common umbrella insurance questions!

Video conference with insurance agent asking umbrella insurance questions

Researching insurance can be challenging! As you read through options and policy details, you can often think of another question for every answer you find. If you've begun to research umbrella insurance in an effort to decide whether or not it's right for you, you've probably got a good list going! To help you chisel away at that list and ultimately make an informed decision, we've answered 15 of the most common umbrella insurance questions!

1. What is umbrella insurance? 

Lawsuits can happen when you least expect them. While many lawsuits can be covered by standard insurance policies, the awarded amount can often exceed the limits of those policies, and there are certainly some incidents that they will not cover.

Simply put, an umbrella insurance policy is an extra layer of liability insurance that extends beyond the coverage limits of your personal liability coverage, or the liability coverage limits of your auto and home insurance policies. Umbrella insurance is designed to pick up where your other policies leave off and protect your assets.

For a deeper dive on the ins and outs of umbrella insurance, check out our blog here.

2. How much umbrella insurance do you need?

As mentioned, umbrella insurance is an extra layer of liability insurance that goes beyond the limits of your existing policies to protect your assets in the event of a lawsuit. So, to answer the question, How much umbrella insurance do I need? you have to first estimate the value of your assets. This includes the value of your home, vehicle, investments, and savings. 

Then, you need to understand the limits of your existing liability coverage. What are the limits for your personal auto liability coverage? What about your homeowners, property, or personal liability policies? If the total value of your assets exceeds your underlying, or existing, liability coverage limits, then you likely should consider umbrella as a way to make up the difference.  

Finally, think about your personal level of risk, which is based on your occupation and lifestyle. This can certainly be difficult and it's not always easy to put a numerical value on your relative risk; there are entire teams of professionals known as actuaries that spend years mastering that. However, you can get a general sense of your own risk by considering the aspects of your lifestyle that could potentially be a cause for damages to others.

Consider two individuals, John and Jane. John lives alone in an apartment that he rents. He has no spouse, no children, and no pets. He drives a modest sedan, and enjoys nature photography in his spare time. On the other hand, Jane is married and has two children: a teenage son and daughter, who are both just learning to drive. Together with their two dogs, they live on a plot of rural property with a large swimming pool, a fishing pond, and even a few horses they enjoy riding. They frequently have friends over and love entertaining guests with all the fun activities they have on their land. While Jane's children drive modest sedans, she and her husband both own sporty two-door coupes. Out of these two examples, who would you say has the greater risk? 

Of course, examples in the real world aren't likely to be as stark and obvious, but by understanding the various elements that could be considered a greater risk, you can look at your own situation and begin to evaluate. If you need assistance evaluating your assets or your level of risk, it is always a good idea to consult a financial advisor.

In general, it's always better to carry more coverage than you think you might need. While that may be cost-prohibitive in some scenarios, umbrella insurance is typically quite affordable. That is to say, the premium you would pay for a large amount of coverage is probably lower than you'd imagine, and certainly can be more affordable than if you were to have the same amount of coverage with an underlying policy.

3. Does umbrella insurance cover rental property?

If you are a landlord, or own rental property, umbrella insurance may cover some of your property, depending on the carrier and policy. Personal umbrella insurance policies generally aren't designed to cover the risks associated with someone who owns many large rental property units. For this reason, you might find that your umbrella policy would cover a small number of units.

For example, if you have four or fewer rental units, or if you have one building with four or fewer units, you could be covered. On the other hand, if you have a large building with five or more units, or if you own and operate five rental property buildings, a personal umbrella policy is not likely to be the right type of policy for the coverage you need. 

4. Do renters need umbrella insurance?

Renters, or people who live in a rented space like an apartment or condominium, can certainly find an umbrella policy helpful. As we discussed, it comes down to your personal level of risk, the total value of your assets, and the limits of your existing coverages. 

It's worth noting that not all renters insurance policies are the same. While some carriers provide renters insurance products that combine property and liability coverages, others may offer them separately. So, for example, you could purchase unscheduled personal property coverage for your personal belongings and then choose to purchase a separate personal liability policy along with it. 

Whether you purchase a renters policy that combines coverages, or choose to purchase them separately, the personal liability portion would be considered the underlying coverage for an umbrella policy and would be required for eligibility. In any case, the umbrella policy would pick up coverage after the underlying personal liability coverage had been met.

5. Will umbrella insurance cover a lawsuit? 

One of the primary uses for umbrella insurance is to protect the insured from lawsuits for bodily injury, property damage, or personal injury. Of course, there are always limits and exceptions to the types of lawsuits an umbrella policy will cover. For example, your umbrella policy is not likely to cover you if you're sued for intentionally breaking a neighbor's windows because they didn't turn their stereo down last night. 

Before purchasing an umbrella policy, take some time to speak with your insurance agent and go over the various coverages and exclusions. 

6. What is not covered under an umbrella insurance policy? 

The term "umbrella" is used in this context because it describes a policy that covers an individual more broadly than basic underlying coverages. However, that is not to say that it protects you from any and all situations. 

"Ineligible exposures" refers to a list that every umbrella insurance carrier has which outlines in detail those situations and circumstances that would preclude an applicant from gaining coverage. This might include:
  • Certain professions, like state politicians
  • Owning certain animal breeds, such as specific dog breeds
  • Preexisting lawsuits or criminal charges, such as a libel suit in the past five years
There are also exclusions, which are situations, or risks, that would not be covered by an umbrella policy. This might include:
  • Using an auto for business purposes
  • Personal injury as a result of a statement that is known by the insured to be false
  • Bodily injury or property damage which is expected or intended by the insured
As with most things, ineligible exposures and exclusions can come with a fair bit of nuance. For example, bodily injury which is expected or intended by the insured is excluded, but could be covered if it was the result of reasonable force used in self defense. 

Again, these will vary from carrier to carrier, so it is important to speak with your insurance agent about your specific situation. 

7. Does umbrella insurance cover slander?

Yes. Both libel and slander fall under a type of coverage called "personal injury," which is included in an umbrella policy in addition to bodily injury and property damage coverages. Personal injury might sound synonymous with bodily injury, but actually refers to injuries that arise out of offenses such as false arrest, detention, imprisonment, libel, and slander. 

Personal injury coverage is not always part of the basic underlying personal liability coverage you may have; although it includes bodily injury and property damage, it often requires an additional endorsement to add personal injury coverage. This is important to remember as an insurance company can require you to add a personal injury endorsement to the underlying liability policy before purchasing an umbrella policy. 

As with most coverages, there are exceptions, and certain types of libel or slander are not likely to be covered by a policy. For example, if the insured individual knows that the libel or slander is false, or if any criminal act is committed, they would not be covered. Furthermore, umbrella won't provide coverage for any offense against an employee of an insured. As an example, that would preclude coverage for suits arising out of charges of discrimination in hiring, firing, or promotion. 

8. Does everyone in my house have to have insurance for me to have an umbrella policy? 

While umbrella insurance policies provide additional liability coverage for you, the insured, it also provides coverage to your family members. For the purpose of these types of policies, "family member" is defined as a resident of your household who is a relative, which can include a ward or foster child, or someone who is under the age of 21 but under the care of another insured who is age 21 or over. 

9. Does umbrella insurance cover professional liability?

A personal umbrella insurance policy is generally not designed to cover professional liability. In fact, professional liability policies are an entirely separate sort of policy.

This means bodily injury, personal injury, or property damage that occurs while you, the insured, are in the process of some business activity won't be covered. Furthermore, some professions or occupations are considered ineligible exposures. In other words, there are some professions that an insurance company considers too great a risk to cover with a personal umbrella insurance policy. 

For example, social media influencers, state or federal politicians, radio or TV broadcasters, and prominent public figures like actors may not be considered eligible for coverage with your standard personal umbrella policy.

10. Can umbrella insurance cover auto?

One of the most common uses for umbrella insurance is protecting yourself from damages caused by an auto accident for which you are liable. It provides coverage that extends beyond the limits of your personal auto liability. 

However, depending on your carrier, there may be certain vehicles that are excluded from coverage. Such vehicles might be high performance super cars, such as a Lamborghini or Ferrari.

11. Can umbrella insurance from one company cover auto insurance from another company?

Yes, but because most umbrella insurance carriers require you to have an existing policy with them, this might not always be the case. However, if your umbrella insurance carrier requires you to have either personal liability or auto insurance with them, you could potentially have auto insurance with one company, and personal liability and umbrella with another. In that situation, your umbrella insurance would be able to pay for auto liability after the auto policy limit has been reached and the umbrella deductible has been paid.

12. Does umbrella insurance cover injuries to passengers?

Yes. If you are liable for injuries to a passenger as a result of an auto accident, your umbrella insurance could kick in if the resulting costs exceed the limits of your underlying auto insurance. This might include the passenger's medical bills, but could also include a lawsuit for additional damages. 

13. Can I be sued beyond the limits of umbrella insurance? 

Unfortunately, yes. If your umbrella policy has a limit of, say, $1 million, it is entirely possible for a court to award damages in excess of that amount. Fortunately, many insurance providers offer incremental limits above $1 million, and may have a cap as high as $5 million. 

Remember, that's in addition to the limits of the underlying coverages. So, for example, if you have a limit of $1.5 million for your underlying policy, and your umbrella limit is $5 million, you'd have $6.5 million total.

14. Is umbrella insurance the same as excess liability? What's the difference between excess liability insurance and umbrella insurance?

Umbrella insurance and excess liability insurance are quite similar; they both offer additional coverage beyond the limits of your underlying insurance policies. Like umbrella, excess liability picks up where the limits of the underlying policy ends. If your underlying liability coverage is $1 million, and you are sued for $1.5 million, a $1 million excess liability policy would cover the additional $500,000 - just like an umbrella policy. 

The difference has to do with the specific policy details, or terms of the policy. An excess liability policy doesn't change or add coverages to the underlying policy while umbrella insurance can in some cases. 

15. Do I have to have an existing policy with an insurance company to get umbrella?

While the exact requirements for underlying or coverages will vary from company to company, you typically have to have some sort of existing coverage with a carrier before they will write an umbrella policy. 

In some cases, they may require that you have both home and auto, but it is also possible that they will only require one or the other. However, regardless of which type of policy they require, you must purchase the amount of liability required by the company guidelines to qualify for umbrella. 

A wooden cutout depicting umbrella insurance covering a family, auto, and home

To learn more about Germania's brand new Umbrella Insurance products, reach out to your local Germania agent today!

by Geoff Ullrich

About the Author

Geoff Ullrich is a writer and Content Marketing Specialist at Germania Insurance.

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