Umbrella liability insurance provides excess liability coverage over several primary, or underlying, liability policies.  Excess coverage may be provided over the general liability, business auto and worker's compensation policies.  If you can visualize all of your primary policies huddled together under the umbrella, you get the idea.  To be covered under the umbrella, each underlying policy must be scheduled.  To be scheduled, the primary policy must meet certain requirements including minimum basic limits and the financial rating of the primary carrier.

What it Covers

An umbrella is another one of those all risk policies.  It covers everything except what is otherwise excluded.  As with other liability policies, its primary coverage is for bodily injury and property damage to others.  An umbrella serves two purposes.  First, it provides catastrophe limits over the primary policy.  In the event of a serious accident, where a single claim could exceed the primary policy limit, the umbrella would provide coverage.  Second, in the event that paid claims reduce the limits available under the primary policy, the umbrella will cover any additional claims which the primary policy would otherwise have covered.  Should the primary carrier become insolvent, the umbrella could also provide drop down coverage.  Under these coverage sections, the umbrella basically provides what is referred to as "following form" coverage.  It covers exactly what the underlying policies cover.

In the olden days, before plaintiff attorney's ruled the world and nobody was responsible for anything, umbrellas used to provide some other coverage.   It is still generally true that an umbrella provides broader coverage than the primary policies.  The umbrella used to provide some amount of pollution, employment practices and errors & ommissions coverage.  That is no longer the case.  After getting sued for every conceivable event, most of these coverage's have been excluded.  Its nearly impossible to give a concrete example of a liability claim where an umbrella would provide primary coverage.  But, they are probably possible.  The fact that they have all been eliminated in one reason to consider purchasing an umbrella.

Limits of Insurance

Umbrellas are written in limits of millions.  All umbrella liability policies contain an each occurrence limit of insurance. Some umbrella liability policies are written with aggregate limits.  The limit selected is somewhat arbitrary and should be based on a combination of the business assets at risk, the hazardous nature of the operation and the cost of the coverage.  Keep in mind that your liability is not limited to your insurance policy limits.  A judgement against you which is over your insurance coverage can be taken from your business or personal assets.

Deductible

Umbrella policies do not have deductibles.  Rather, they use what is called a self insured retention.  The self insured retention is the amount of the loss an insured must pay before the umbrella policy would be required to respond. The self insured retention would apply when a loss is excluded from coverage under the primary policy, but not excluded under the umbrella policy.  It also applies when the umbrella must provide primary coverage because the underlying policy limits have been used to pay prior claims.

Now you know what it is.... Find out what it cost.

For a detailed premium quotation, click here!