Umbrella Insurance was introduced in the US insurance domain way back in the latter half of the 1940s. It gained popularity slowly as the nation started to grow in financial strength and its people 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 on the personal insurance front.
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’s limits are reached for a certain claim criteria
When the total limits of the underlying liability policy gets 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.
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 cover for the business properties including but not limited to the building, business vehicles, tools and equipment, computers, important papers and other assets covered under the commercial general liability policy and other liability policies owned by the insurance.
A Personal Umbrella policy can be written to provide extra protection topping up a homeowners insurance policy, automobile insurance policy, additional liability policies for private boats and a renters insurance policy.
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 would be used to pay for any additional damages to third parties owing to risks as defined 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 propert
An Umbrella policy is mostly 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 quite high. Also, maintaining a favorable market reputation and/or respectable public image is more of a necessity for this niche. Umbrella policies ensure to 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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