What is an Umbrella Policy of Insurance and Why Have One

As trial lawyers representing injured persons, we are often asked what is an Umbrella insurance policy and why should I have one.  This is an important question because it affects others and yourself.  As any insurance policy is for the protection of others and yourself, the more coverage you purchase, the more you are protected.

An umbrella policy is an “extra” policy on top of your regular policy (which can cover your home car or business).  The umbrella policy pays on a claim only after the underlying, or main, policy limits are paid in full.  Thus, as an example, if you are in a car accident that is your fault, and the person you hit is severely injured (brain injury, paralyzed, broken bones etc.) or killed, you would be protected against a judgment by that person against you up to the limits of your underlying (main) policy and the limit of your umbrella policy.

Typically, insurance companies require a higher limit on the underlying policy before they will sell you an umbrella policy.  The underlying limit of coverage is usually required to be at least one hundred thousand dollars, sometimes two hundred and fifty thousand dollars, sometimes even more.  Umbrella policies usually are sold in million dollar increments.

In our example, if you purchased one hundred thousand dollars of coverage and a one million dollar umbrella policy, you would be protected from a claim by the injured person against you in the amount of one million one hundred thousand dollars.  If a judgment higher than that amount were entered against you, the injured person could collect the judgment against you by having the Sheriff execute on your property to pay the balance.

Obviously, having enough insurance is important to protect, (1) to the injured person to compensate them for any harm you may cause); (2) your own assets; and (3) yourself in the case where the accident is not your fault but rather the fault of another driver.  If that other, at fault driver, has little or no insurance, you would still be protected by your own underlying policy and umbrella policy (be sure your company links the two policies together) for your own injuries, or loss of income from work caused by your injuries.  So, ask your insurance agent about umbrella insurance policies, and if you can do it, protect yourself and others with adequate insurance coverage for any serious injuries or death you might cause, or you might suffer at the hands of a negligent driver.