A standard auto or homeowners insurance policy will cover your liability risks only within certain limits. Some types of personal injury or property damage claims against you can quickly exhaust your base coverage, exposing you to a substantial financial setback. You can cover the excess liability risk with umbrella insurance in NY. Read on to learn more about the importance of having extra liability protection.
What Is Umbrella Insurance?
Umbrella insurance gets you additional liability protection beyond the liability limits on your standard policy. When you have insufficient base coverage for expensive third-party medical bills or repairs, it comes into play. It’s a form of excess liability insurance that can cover lawsuits resulting from incidents such as:
- A guest drowned in your inground pool
- Your dog bites a neighbor
- You crashed your car into a building
Umbrella insurance can cover the difference when a claim amount exceeds your standard coverage liability limits. For example, assume you’re liable for a car accident that results in medical bills up to $400,000. This figure exceeds your $300,000 auto liability insurance limit by $100,000. In that case, your umbrella policy can settle the balance.
What Else Does Umbrella Insurance Cover?
Excess liability coverage can provide protection not available on your auto or homeowners insurance policy. These may include:
- Defamation (such as when you’re sued for posting damaging comments about an individual or entity online)
- False detention or imprisonment
- Malicious lawsuits (baseless litigation)
- Breach of privacy
- Wrongful eviction
Claims That Umbrella Insurance Doesn’t Cover
Umbrella insurance only covers liabilities. The coverage doesn’t include policyholders’ losses or injuries. So, for example, the policy won’t kick in when your homeowners’ insurance’s fire damage or theft coverage limits fall short. Neither will it cover medical expenses for your injuries (you’d need health insurance for this). Other specific exclusions include:
- Stolen or damaged personal belongings
- Business losses
- Deliberate criminal acts
- Contractual obligations
- Deliberate injury
Where to Get Umbrella Insurance
Most carriers that provide auto, home, or watercraft insurance also sell umbrella insurance. However, getting the coverage through your agent is more convenient, especially if you need to consult extensively before buying.
You can’t get umbrella coverage without a base policy like home or auto insurance. Also, you need to satisfy liability coverage requirements as follows:
- $300,000 in homeowners insurance liability
- $100,000 per victim and $300,000 per accident for auto insurance bodily injury
- $100,000 for auto accident property damage
Deciding Whether You Need Umbrella Insurance
Having umbrella insurance aims to prevent significant financial loss resulting from costly liability lawsuits or claims. You may need this policy to protect your assets if you’re wealthy since you can be a prime target for an expensive lawsuit.
Here are some risk exposures that may warrant investing in an excess liability policy:
- You built an inground swimming pool at home
- You’re a charitable board member
- You have potentially aggressive pets like dogs
- You’re a public figure
Estimating Your Umbrella Coverage Needs
The amount of umbrella insurance you need depends on factors such as:
- The value of assets you wish to protect in case of a lawsuit
- Future income at risk based on the assets you’ve accumulated so far
- Prospective future earnings based on factors like your current academic credentials