Umbrella Liability Coverage
By: Suzanne Lako
The Henssler Financial Group Position Paper

One of the most overlooked and underrated types of insurance is the umbrella policy. An umbrella policy is a personal liability policy that provides coverage against catastrophic liability exposures involving home, boats, cars, recreational vehicles and sports. This type of coverage is a supplement to the coverage provided in automobile and homeowner policies. The umbrella policy will not become effective until claims exceed the liability coverage limits provided in the automobile and/or homeowner policies.

In addition to supplementing liability coverage provided by your automobile and homeowners policies, an umbrella policy covers personal injuries including libel, slander, invasion of privacy, malicious prosecution, and wrongful eviction or entry. Other injuries covered can include liabilities arising from business pursuits, business property, rental property, large watercraft and recreational vehicles.

An umbrella policy is purchased for future protection against a large jury award as a result of a lawsuit. What many people may not realize is that when the policy becomes effective, it also provides for the legal costs of their defense. In this sense, an umbrella policy can be regarded as prepaid legal expenses in addition to the protection it provides against large jury awards.

A good umbrella policy is very cost effective. This type of coverage links different policies, thereby raising the limits on the underlying policies. The umbrella coverage can supplement a million (or several million) more dollars to the automobile and homeowner policies' liability limit. This approach is more effective than raising the limits on your automobile or homeowner policies. Not only may that coverage be more expensive, it would not expand your coverage as the umbrella policy does. Please note that you cannot carry the minimum coverage available on the automobile and homeowners policies and be able to purchase umbrella coverage. To purchase the umbrella policy, your underlying liability on the automobile and homeowner policies must be high enough to meet the deductible on the umbrella policy. You should have your insurance professional verify that your underlying liability is high enough to meet the deductible.

There is no standard umbrella policy. You must find one that matches your particular situation. Generally, the annual premium for an umbrella policy is very reasonable — especially for the "peace of mind" this type of coverage provides. The Henssler Financial Group strongly recommends that you speak to your insurance agent about umbrella liability coverage. For more information regarding this topic, please contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com.