Umbrella insurance provides policyholders with extra liability protection against major claims and lawsuits that go beyond the limits of what their basic insurance policy covers. This excess liability coverage protects them against bodily injury liability claims, property damage liability claims, legal fees, and other liability claims that you are held legally responsible for payment. The primary purpose of an umbrella policy is to protect assets such as a home, cars, investments, bank accounts, collectibles, and future projected income. These assets can be used as a form of payment if a basic policy doesn’t cover the amount of a judgment from a lawsuit.
In addition to covering personal liability, an umbrella policy can also provide coverage for business and professional liability. Errors and omissions is a common type of umbrella policy used by financial planners, real estate agents, accountants and others who are in the advice-providing industries. This type of insurance protects the policyholder from negligence claims made by a client who is seeking damages for alleged financial losses due to an error or omission in the services provided by the policyholder. Errors and omissions don’t provide financial coverage for criminal prosecution. Malpractice insurance is like an errors and omissions policy, except it is an umbrella policy that is used by medical professionals.
It’s important for a policyholder to understand what their umbrella policy covers and what it doesn’t cover. For instance, a personal umbrella policy doesn’t cover flood damage, some types of property damage, or uninsured motorists. A professional umbrella policy doesn’t provide coverage for liabilities that fall under civil law. The amount of coverage needed will depend on how much risk the policyholder faces. They will also need to consider how much assets they have and forecast their future income or earning potential. Working with an independent insurance agent will help them to determine the amount of coverage needed for their umbrella policy.