Many homeowners in Central Indiana ask me if they should purchase an umbrella liability policy.  That’s a great question.  And the answer is an unqualified, “It depends.”

First, let’s take a look at what an umbrella policy is.  It’s a separate policy purchased to provide additional protection to individuals. For a relatively low cost (typically $150 – $350), you can purchase an additional million dollars of liability coverage.  And more coverage is available.  (There are also commercial umbrella policies available, but this discussion will focus on individual policies).

Who should consider an umbrella?

There are a few people who should consider an umbrella policy:

  1. Indiana homeowners.  If you own a home, you face higher risk than those who don’t.
  2. People with a lot of assets. If you have a lot to lose, it makes sense to insure it.
  3. Those with increased risk.  That includes dog owners, people with a pool, and families with teen drivers in the household.  Those three factors increase the possibility of being named a defendant in a lawsuit.

Why purchase an umbrella policy?

There are three main reasons:

  1. Peace of mind.  If you are worried about losing assets because of a judgement against you, you might want an umbrella policy.
  2. Higher limits of liability. An umbrella policy gives you an additional layer of protection. An example I used when I was discussing this on the radio is based on the TV show “Modern Family.”  On the show, Phil Dunphy often trips coming down his stairs and says, “I need to fix that step.”  If a guest were to trip and fall and get hurt, he might sue Phil for hundreds of thousands of dollars.  If Phil has an umbrella policy, he will have an additional $1 million (or more) to pay claims that he’s legally obligated to pay.
  3. Broadened Coverage. This can be in the form of a larger coverage territory or more perils.  An example of larger coverage territory is that the Indiana auto insurance policy typically covers losses that occur in the US, its territories or possessions, Puerto Rico, and Canada.  An umbrella policy can extend coverage worldwide.  More perils can be something such as libel and slander.  Some Indiana home insurance policies don’t cover libel and slander.  An umbrella policy can cover that.

Other things to know

When purchasing an umbrella policy, your agent will want to know whether or not you have a boat, a second home, or teen drivers.  These are all additional risk factors that may increase the cost.

Another benefit of having an umbrella policy is that it also covers the legal defense costs.  So if you are sued, your insurance company will help defend you against the claim.  Attorney fees can easily run into the tens of thousands of dollars for a messy dispute.

You will also be required to maintain certain liability coverage amounts on your home insurance and auto insurance.  For example, if you have home insurance in Fishers, you may be required to have $300,000 in liability to purchase an umbrella policy.  Or your Indianapolis auto insurance policy may be required to have liability limits of 250/500/100.  Your agent can help you with the requirements.

If you want to learn more about an umbrella liability policy, please contact our Fishers independent insurance agency at 317-644-1770.