Personal Umbrella Policies

A personal umbrella policy provides an extra layer of liability protection beyond your underlying policies. For relatively low cost, umbrellas provide millions in additional coverage.

What Is a Personal Umbrella Policy?

Definition: A policy that provides excess liability coverage above your underlying auto, homeowners, and other personal liability policies.

Key Characteristics

---

How Umbrella Policies Work

Excess Over Underlying

The umbrella sits "above" your underlying policies:

┌────────────────────────────┐
│   UMBRELLA ($1 million)    │ ← Pays after underlying exhausted
├────────────────────────────┤
│ Homeowners │     Auto      │ ← Underlying policies pay first
│  $300,000  │   300/500     │
└────────────────────────────┘

Example: Large Auto Claim

Scenario: You cause an accident with $800,000 in damages.

---

Underlying Insurance Requirements

Umbrella policies require minimum underlying limits:

Common Requirements

Why Requirements Exist

• Prevents adverse selection
• Ensures umbrella isn't used for small claims
• Reduces umbrella claims frequency
• Keeps umbrella premiums low

---

Self-Insured Retention (SIR)

Definition: The amount the insured pays when the umbrella covers a claim NOT covered by underlying policies.

When SIR Applies

Typical SIR Amounts

• $250 to $10,000
• Most common: $250-$1,000

SIR Example

Scenario: You're sued for defamation ($100,000). Your homeowners doesn't cover defamation. Your umbrella has a $250 SIR.

---

Umbrella vs. Excess Coverage

Drop-Down Coverage

Umbrella "drops down" to cover claims that underlying policies exclude:

Common Drop-Down Coverages:

• Personal injury (libel, slander, defamation)
• False arrest
• False imprisonment
• Malicious prosecution
• Invasion of privacy

---

What Umbrella Policies Cover

Typically Covered

Typical Exclusions

---

Who Needs an Umbrella?

High-Risk Indicators

Cost-Benefit Analysis

• $1 million umbrella: ~$200-$400/year
• $2 million umbrella: ~$100-$150 more
• Each additional $1 million: ~$50-$100

Bottom Line: Umbrella insurance is one of the best values in personal insurance — millions in coverage for hundreds of dollars.

---

Important Policy Provisions

Following Form

Umbrella uses same definitions, exclusions, and conditions as underlying policies for covered claims.

Maintenance Clause

Insured must maintain required underlying limits. If underlying lapses:

• Umbrella treats underlying as if it were in force
• Insured responsible for underlying limit amount

Drop-Down Provision

For claims NOT covered by underlying:

• Insured pays SIR
• Umbrella covers above SIR
• Subject to umbrella exclusions