If you have an umbrella insurance policy, you may think that you are fully protected from any liability claims that exceed your primary insurance limits. However, there are some situations where your umbrella insurance company may deny your claim or refuse to pay the full amount. Here are some possible reasons why this could happen and what you can do about it.
Reasons for denial
Umbrella insurance is designed to provide extra liability coverage for claims that go beyond your auto, home, boat or RV insurance. It also covers some claims that are not covered by your primary policies, such as libel, slander, false arrest and malicious prosecution. However, umbrella insurance is not a blank check for any liability claim.
Intentional or criminal acts
If you cause harm or damage on purpose or while committing a crime, your umbrella insurance will not cover you. For example, if you assault someone or vandalize their property, you cannot expect your umbrella policy to pay for the damages or legal fees.
Business or professional activities
Umbrella insurance is meant for personal liability claims, not for business or professional ones. If you are sued for something related to your work or business, such as malpractice, negligence or breach of contract, your umbrella policy will not cover you. You need a separate business or professional liability policy for that.
Umbrella insurance does not cover liability that you assume under a contract or agreement. For example, if you sign a lease that makes you responsible for any damage to the property, your umbrella policy will not cover you if you cause a fire or flood in the rental unit.
Excluded activities or locations
Umbrella insurance may exclude certain activities or locations from coverage. For example, some policies may not cover you if you participate in extreme sports, such as skydiving or bungee jumping, or if you travel to certain high-risk countries.
Insufficient underlying coverage
Umbrella insurance requires that you have a certain amount of liability coverage on your primary policies before it kicks in. Here, the general rule for umbrella insurance policies is that your homeowner’s insurance policy needs personal liability, bodily injury and property damage liability at $300,000 per occurrence or higher.
Your per person amount must be at least $250,000 ($500,000 per accident) for bodily injury liability. Finally, the property damage liability on your car policy, usually, must be at least $100,000. If you do not have these minimum limits on your primary policies, your umbrella policy may not cover the excess amount.