Umbrella liability insurance protects the financial interests of its policy owners by providing extra blankets of coverage on top of other insurance plans. These policies, which can be bought by individuals and businesses, provide cost effective coverage as one of its several benefits. However, umbrella liability plans have coverage restrictions that leave policy owners unprotected against lawsuits in several areas.
Umbrella liability insurance policies cover claims that have exceeded the policy limits of underlying insurance plans. For businesses, umbrella liability insurance typically provides extra protection to policies such as general liability and employer’s liability. Individuals purchase these plans to cover insurance plans like homeowners and auto. Some of the incidents covered by umbrella liability plans include bodily injury, property damage and personal injury.
Because umbrella insurance plans are considered secondary coverages, which means they kick in only after the coverage amounts of the primary policies have been exhausted, they are fairly cheap to purchase. For instance, individuals can purchase $1 million umbrella liability insurance policies for $150 to $300 per year with an extra million costing about $75 and $50 for each million after that, as of 2010.
By purchasing umbrella liability insurance, policy owners are adding higher amounts of liability and broadening their coverages to protect themselves financially. This is important because award amounts that exceed their policies’ coverage limits would be their responsibility out of pocket.
Umbrella liability insurance policies do not extend coverage to all policies or incidents. For businesses, umbrella liability insurance does not provide extra coverage for things such as errors and omissions and professional liability. Individually owned policies do not cover damages resulting from business operations or intentional acts. These policies do not cover punitive damages either.