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Umbrella Liability.


When purchasing home insurance, auto insurance, or business/commercial insurance a consumer almost always has a set limit of liability insurance included.  That limit is usually around $1 million in coverage and is designed to provide funds when the customer may be held liable for property damage or injury sustained by a third party.  The limit of insurance for liability coverage can be increased in some cases, but it also has limits to what and where it may provide coverage in the event of a claim made against the insured.


For instance, a home insurance policy may not extend liability to a rental car rented by the insured, or to a rented vacation home that an insured has rented for a vacation.  However, the risk to the consumer still exists and there are holes that might need filling so considering extra Umbrella Liability coverage is a prudent option.


Umbrella liability coverage is a bit like the actual device of an umbrella, it comes in to cover ‘over’ an existing policy when it has been exhausted or does not cover the peril that occurred.  Another description about how umbrella liability works is that it extends coverage out beyond the existing limits of current, existing liability coverage.  The most often-asked question is what kind of coverage is included with umbrella liability?


Items such related to legal proceedings such legal defense fees, attorney fees, and monetary awards or judgements are covered.  Medical bills or therapies that are required to the injured third party or lost wages can be covered.  However, there are different ways in which a person can be hurt and another party responsible for the damage.  Libel and slander claims can be covered as well as other categories of liability that a person may have to honour which is especially important in the age of social media.

When looking at possible risks think about how some one can be pulled into a liability situation.  Exposures via children, owning multiple homes or rental properties, using domestic staff, hosting events, and volunteering all increase the possibility of liability claims made against an insured.


Umbrella liability policies are not equal though, as many companies seek advantages to make their products unique and attractive.  Generally, commercial operations are not covered but some personal umbrella policies will cover voluntary work as directors and officers on boards such as condominiums should an insured belong to one.  Another scenario for umbrella liability is for snowbirds, who rent homes in another country and could be held liable for damage or injury while having care and control of that residence. An umbrella policy could cover their liability exposures while out of country and renting and while using a rental car.


It is important to review with an insurance professional the needs and possible exposures to find the right umbrella policy.  Not all insurance companies offer umbrella policies as additional coverage and an insurance broker can help find the right company or coverage even as a stand-alone policy from the regular homeowner policy.  Talking to an insurance professional about possible risk exposures can help develop a comprehensive risk profile and inform about the best methods to manage those risks and whether umbrella liability is a suitable or necessary option.


Written By: BSI