Why do I need a personal liability umbrella policy?

Major insurance policies, such as automobile and homeowners insurance, have certain liability limits which can very easily be exhausted in a serious liability lawsuit against the insured. Not being adequately protected in a liability case is a very real possibility, especially in present-day courtrooms where more and more money is being awarded to plaintiffs than ever before.

Since society has become increasingly litigious, with people filing liability claims about the most minor and insignificant actions, we can say nobody is insured against being the defendant in such a lawsuit. Nor can one predict the judge's decision or the compensation one will have to pay. What if the judge decides to award exorbitant punitive damages for gross negligence? Unfortunately, primary insurance policies do not offer adequate liability protection for such events.

This is exactly where personal liability umbrella policies come into action: providing considerable financial protection above and beyond the liability limits of major policies, and covering the 'gaps' of auto, home, and watercraft insurance.

How Personal Liability Umbrella Policies Work

An umbrella policy gives an insured a second 'shield' of personal liability protection. Here are its main characteristics:

• Personal umbrella insurance 'kicks in' after the liability limits of an auto, homeowners or watercraft insurance policy have run out.
• Personal liability umbrella policies have a really good value due to their broad coverage and low premium rates.
• Umbrella insurance rates typically range between $100 and $200 per year for $1 million in a second layer of personal liability coverage, and an extra $100 for every other million. The maximum personal liability umbrella coverage you can purchase is $5 million.
• Umbrella insurance is designed to cover the 'cracks' of major insurance policies, which typically abound in exclusions. In comparison, personal liability umbrella policies usually cover situations that are not included in a homeowners or an auto policy.

• What do I need to consider when buying a personal umbrella policy?
• Are exemplary damages insurable and can you tell me the insurability of punitive damages by state?
• Director and officers (D&O) liability insurance vs. general liability insurance - one or both?
• What does primary and non-contributing really mean in regards to general liability insurance coverage?
• How can I find the best professional liability insurance company?