An Umbrella Policy is a policy which is specifically designed to provide additional liability coverage when you have exhausted the limits of your traditional policies. If you are like most of us you carry several lines of insurance to protect your personal assets. These make include auto insurance, homeowner or renters insurance and perhaps even RV or boat insurance. Each of these policies offers coverage for described property and also provides some liability coverage in the event you injure another or damage their property. Within the liability coverage each of these policies also has a limit, which is a maximum amount payable per loss. If this limit is inadequate to pay for the total loss, you are personally responsible for the balance. A solution to this “underinsurance” problem is to purchase an Umbrella policy. As its name implies, this policy provides an “umbrella” of liability protection over each and all of these other policies. If the limit of your “underlying” auto policy, or homeowner policy or boat coverage is inadequate to pay all the damages in a given loss, the umbrella policy steps in and pays its limit of top of such underlyer.

Example: A race to the railroad crossing finished in a tie. The collision caused the derailment of the train locomotive which slid down an embankment and into a river. The cost to extract and repair the locomotive was over $1,000,000 and the driver of the automobile (who was miraculously unharmed) was held responsible. The driver’s auto policy paid its property damage limit of $100,000 and the umbrella stepped in and paid the balance. Without the umbrella coverage the driver could have lost all that he owned in an attempt to pay the damages.

An umbrella policy may also provide coverage (subject to a deductible called an SIR) not provided in the underlying policies such as worldwide auto liability coverage or coverage for libel and slander. If you are interested in more information or to obtain this valuable coverage please call us at 866-540-7335.

This content is offered for educational purposes only and does not represent contractual agreements. The definitions, terms and coverages in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.

This is an amount of money which must be paid by the insured in the event of loss, prior to the insurer paying ay sums. The purpose of a deductible is to eliminate small claims and the administrative cost of handling them. The estimate is that it cost between $300.00 and $400.00 to handle the administrative cost of even the simplest auto claim. This is only the cost of assigning the adjustor, handling and processing the paperwork, and reporting the information to the appropriate sources. This has nothing to do with the amount paid for the claim but merely the internal cost to handle the claim. The purpose of the deductible is to eliminate as many of small claims as possible and their inherent cost. In its simplest form this is how it works.

Driver “A” backed his car into a post at the local high school parking lot. No one was hurt and the post was undamaged. If the cost to repair the damage to his automobile is less than his collision deductible, then driver “A” has no claim and will have to absorb the cost of repair himself. If the repair cost exceeds the deductible then driver “A” will have to pay the deductible and the balance will be paid by his collision insurer. Logically then, the higher the deductible, the fewer claims get reported and so the lower the premium. Deciding what deductible to carry is a bit of a balancing act. You must balance the savings of a lower premium against the higher cost to you in the event you have a loss.

If you have questions regarding this or any other insurance matter, please give us a call at 866-540-7335.