Umbrella Insurance
About Umbrella Insurance
Umbrella Insurance was introduced in the US insurance product offerings in the latter half of the 1940s. It gained popularity slowly as the nation started to grow in financial strength and its citizenry developed a taste for expensive personal and commercial assets. Nowadays, it is considered as one of the more common insurance protections sought by businesses as well as one of the preferred safety cushions for high-net-worth customers for personal insurance.
Definition
Umbrella Insurance is a protection provided over and above different primary liability insurance policies written for various businesses and/or personal risk protections. By definition, it covers additional expenses for:
- Direct losses from injuries or damages when the basic liability insurance policy(ies) limits are reached for a certain claim criteria
- When the total limits of the underlying liability policy get exhausted in taking care of only a portion of the full claim amount dealing with multiple facets of risks
- When losses incur due to some risks indirectly related to the primary liabilities which are not listed in the contract of the basic liability insurance. These indirect risks include but are not limited to events like false arrests, invasion of privacy, slander, vandalism, libel, and the liability coverage beyond a renter’s insurance policy.
Umbrella Insurance is a protection provided over and above different primary liability insurance policies written for various businesses and/or personal risk protections. By definition, it covers additional expenses for:
- Direct losses from injuries or damages when the basic liability insurance policy(ies) limits are reached for a certain claim criteria
- When the total limits of the underlying liability policy get exhausted in taking care of only a portion of the full claim amount dealing with multiple facets of risks
- When losses incur due to some risks indirectly related to the primary liabilities which are not listed in the contract of the basic liability insurance. These indirect risks include but are not limited to events like false arrests, invasion of privacy, slander, vandalism, libel, and the liability coverage beyond a renter’s insurance policy.
Types
Depending upon the primary liability policy, an Umbrella policy can be written for various risks an insured may face in the commercial and/or personal front.
- A Commercial Umbrella policy may be designed to provide extra liability coverage for the business properties including but not limited to general liability, automobile liability, employers liability section of workers compensation and other liability policies owned by the insurance.
- A Personal Umbrella policy may be written to provide extra protection increasing a homeowners insurance policy, automobile insurance policy, additional liability policies for private boats and a renters insurance policy.
Applicability
The applicability of Umbrella Insurance policies are generally dependent on the insurance criteria of the primary liability policies written for both commercial purposes and personal coverage. If a business or a person has been insured with a Commercial General Liability policy or a Homeowners / Automobile / Renters Insurance policy respectively, then they can opt for Umbrella policies to secure higher and broader protection. Umbrella policies provide additional limits of coverage beyond the underlying policies as discussed earlier.
There are certain exceptions that an Umbrella policy does not cover in most cases.
Some of these are:
- Coverage for damages intended and/or manipulated by the insured and/or a covered member under the primary policy
- Coverage for risks related to personal aircrafts, non-traditional watercrafts and recreational vehicles excepting golf carts and snowmobiles
- Coverage for damages incurred under a valid agreement or contract
- Coverage for damages of the insured’s own property
Importance
An Umbrella policy is considered a requirement for most high value businesses and high-net-worth individuals, since the risks of losing huge amount of money in claims and lawsuits filed against them is statistically higher. Also, maintaining a favorable market reputation and/or respectable public image is more of a necessity for this niche. Umbrella policies may cover the possible risks on both these situations, with broader and larger coverage than the primary liability insurance policies.
Points to note
Since the Umbrella policies tend to provide greater protection on a wide array of events, it may be quite lucrative and misleading as to how much protection a certain business or individual will actually need, if at all. As with any and all insurance coverage options, it is always best to consult an authorized and reliable insurance personnel and discuss in detail the exact risks and existing coverage a business or an individual has, to decide whether or not the Umbrella coverage is needed.
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