What’s an umbrella policy, and what does it cover?

Q: What exactly is an umbrella policy?

Umbrella policies (which are sometimes referred to as excess liability or personal liability insurance) protect against financial damages that may be incurred when you, the policyholder, are found responsible for damages in the wake of an unforeseen event. 

So for example: if you’re involved in a car accident, you get sued by someone involved, and you lose the subsequent lawsuit, you might be responsible for covering the other party’s medical expenses — which could cost hundreds of thousands of dollars. If you have an umbrella policy, your assets will be protected.

Okay, okay, but what do umbrella policies really cover?

Like most things insurance, it depends on the policy you have, but in general, umbrella policies work in tandem with other policies, like auto or homeowners insurance. 

If after the aforementioned car accident, for example, you’re sued for $500,000 worth of medical expenses, but your auto insurance only covers $100,000, this is where the umbrella policy kicks in (or pops open, if you’ll allow us to make an umbrella analogy). Without it, you’d have to cover the difference by pulling from personal savings. 

Umbrella policies protect against:

• Property damage to someone’s belongings, including in a car accident
• Another person’s injuries or medical bills, owing to, again, a car accident, or a pet maiming, or other incidents that might occur to a guest in the policyholder’s home
• Other types of liability one could be sued for, such as slander, libel, false arrest, or imprisonment
  

And if you have dependents, umbrella policies can offer them protection too. So if your kid is caught defacing school property (kids these days!), an umbrella policy can help offset the damages.

What isn’t covered?

While umbrella policies cover a lot, they don’t cover everything. For instance:

• Umbrella policies won’t cover your businesses. They offer personal liability insurance, so nothing commercial is covered. 
• High-risk activities, like dog racing (if that’s what you’re into!), are often excluded.
• Not all types of vehicles are covered either, so you’ll need to ask if your snowmobile, golf cart, or boat is excluded.
• And any damage to your own property won’t be covered — this is why you have other policies in place. 
  

While it may seem silly to spell out, if you’re sued as a result of criminal activity — say you get into that car accident after robbing a bank — you won’t be covered. In fact, there are lots of exclusions to umbrella policies, so if you’re concerned about something in particular, it’s best to speak with your provider or agent. 

At the end of the day, umbrella policies offer another form of protection, whether you’re at high risk for being sued or not. And to help you keep track of all your insurance policies, we’ve built a one-hub digital wallet that helps you stay organized and and earn rewards just for having insurance. Get started by setting up your Marble account today.