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Personal Umbrella and Excess Liability Insurance

Liability Coverage Above Policy Limits in Automobile/Boat/Home or Other Insurance

Why Do Some People Buy Personal Umbrella or Excess Liability Insurance?

Your assets could be at risk if you are sued and you are found liable. For example, you could be sued if an accident occurs on your property or if an accident occurs while you or anyone else has operated your car, boat, snowmobile or other vehicle.  You could also be sued for libel, slander or negligence due to actions that may not be associated with your car, boat, snowmobile or other vehicle. If you act in any manner that harms another person, that person could sue for damages that you are claimed to have caused.

The liability limits under your automobile, boat and/or home insurance policies may not give you enough protection in the event you are liable for damages. You may wish to add a personal umbrella or excess liability policy to your existing protection.  It is important to remember that the more assets you have, the more you are at risk for damages due to a lawsuit. 

What is “Underlying Insurance” for a Personal Umbrella or Excess Liability Policy?

Policies covering an automobile, a home or a watercraft are considered “primary” policies and are responsible for all covered losses up to the policy limits.  A personal umbrella or excess liability policy will respond to losses ONLY when the limits of “primary” policies are exhausted. 

Personal umbrella and excess policies require that you maintain “underlying insurance” – a policy covering your automobile, home, watercraft or off-road recreational vehicle – each of which is listed on the declarations page of the umbrella policy.  If you do not maintain these coverages and a loss occurs, the umbrella or excess liability policy will treat the underlying insurance limits as a deductible and will pay only after you have paid the noted limits.

It should also be noted that personal umbrella and excess liability policies often include broadened coverage beyond what is provided by “underlying insurance.”  Coverage beyond what is covered under “underlying insurance” could be subject to a deductible and not an underlying coverage limit requirement.

You should consider a coverage limit that is high enough to help you protect your assets from being taken as compensation to another as a result of a lawsuit, but only above whatever other protection you may have under automobile, boat and home insurance or any other liability insurance.  Most personal umbrella or excess liability policies can be bought to cover potential liability losses in million dollar increments.

What May Affect the Cost of My Insurance?

  • Amount of Coverage: The amount of coverage you buy will affect the price you pay.
  • Number of Houses, Cars, Boats Owned: The number of houses, cars or boats owned will affect your overall risk and the overall price you pay.
  • Limits Required on your Underlying Policies: The higher the limits required on your automobile, home, boat and off-road recreational vehicles (i.e., “underlying policies”), the lower the premium on an umbrella or excess liability policy.    It is important to look at all the coverages since the cost of the increased limits on the underlying coverage might exceed any savings on the umbrella or excess liability policy.
  • Past Experience: If you have a history of incidents involving lawsuits, this may be used as a factor in setting your rates, based on the likelihood of your having future lawsuits.  Having a poor driving history can affect the cost of umbrella coverage or be a factor in rejecting your submission for an umbrella policy.

Don’t My Other Policies Cover Me in Case of Lawsuit?

Yes, but their coverage is likely limited.  Basic home insurance policies usually limit coverage for personal liability up to $100,000 per claim and exclude any claims related to autos, boats and business activities, as well as any actions alleging libel, slander, false arrest or defamation of character.

Personal automobile policies in Massachusetts may limit coverage for bodily injury at $35,000 per person and $80,000 per accident, and for property damage at $5,000 per accident.  You may be able to purchase additional coverage, but it may only be limited to accidents associated with your automobile or boat.

This insurance is intended to address these types of costs, along with the costs of defending yourself.  It is important not only that you have coverage to protect you from unexpected occurrences, but also that the coverage is adequate to meet your needs.

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