Umbrella insurance is personal liability insurance that can assist policyholders when they have a claim for more than what other insurance will cover, such as homeowners, auto or watercraft policies.
It also provides liability coverage beyond what the policyholder’s renter’s policy covers and other liability claims like libel, slander and false imprisonment. They can also cover malicious prosecution, wrongful entry, invasion of privacy and other related claims.
Umbrella insurance covers the policyholder and their other family or household members, depending on how a household member is defined in the policy.
Many insurance companies offer umbrella insurance because policyholders can be sued and be held financially responsible for a number of incidents. They are generally offered when the policyholder’s total asset value, including checking and savings accounts, retirement accounts, college savings, investment accounts and home equity is more than his or her auto or homeowner’s liability. This is intended to protect policyholders from losing their assets entirely in a lawsuit.
Generally, people who are engaged in an activity that puts them or their family members at a higher level of risk may seek an umbrella policy. These activities may include owning property and renting it out, hosting large parties or being a well-known public figure.
Umbrella policies routinely have exclusions. These include damage to the policyholder’s own property, damages that the policyholder or a covered household member intentionally causes, liability for business or professional activities and liability the policyholder assumes under a contract he or she signed.
The claimant may state that the insurance company is acting in bad faith when those are not covered, even though there is a valid exclusion. However, an experienced attorney can review the umbrella coverage and defend against those claims.