More than 400,000 personal injury claims are filed in the United States each year – roughly twice the population of Des Moines. About 95% of these claims end in pre-trial settlements, which often take the form of the defendant’s insurance provider paying a sum of money to the plaintiff.
If you become the defendant in a personal injury case, then you had better hope your insurance provider will pay whichever amount you are held liable for. But what happens if you’re held liable for a larger amount than your insurance policy will cover? In that event, you will have to pay the difference out of pocket…
…unless you have umbrella insurance. This supplemental insurance policy provides protection beyond the limits of your homeowners, auto, or other insurance policies. It’s an affordable way to enjoy extra peace of mind that a personal liability situation won’t leave you financially destitute.
When Is Umbrella Insurance Used?
Umbrella insurance can take effect when the policyholder is liable for a personal injury or property damage claim that exceeds the limits of their other insurance coverages, including the personal liability coverage which is usually included in homeowners and renters policies.
For example, suppose you are involved in an auto accident for which you are deemed liable. The person your vehicle struck is awarded more damages than your auto policy will cover. If you have umbrella insurance, it will take effect once your auto policy’s coverage is exhausted.
Umbrella insurance can also take effect when the policyholder incurs a loss which liability policies don’t normally cover, such as when they are held liable for slander, libel, false arrest, malicious prosecution, or causing shock or mental anguish.
For example, if you are held liable for damages resulting from derogatory comments you allegedly made, then your umbrella policy may cover the full amount you are ordered to pay for said damages.
Do You Need Umbrella Insurance?
Umbrella insurance usually provides coverage for bodily injuries, property damage, personal liability situations, and certain types of lawsuits. Let’s provide a few more examples of situations when umbrella insurance could fully protect your assets.
- You are at fault for a serious car accident, and are liable for large medical expenses and/or damage to valuable property
- Your dog bites a houseguest (a misfortune for which Iowa assigns strict liability to the dog’s owner)
- A houseguest trips and falls down the stairs in your home, or suffers a grave injury there for any other reason
- A neighbor’s child injures themself on your property, despite not having been welcomed there
- A complete stranger slips and falls on an icy sidewalk by your home or rental property
What Doesn’t Umbrella Insurance Cover?
Umbrella insurance doesn’t cover every expense you could incur as the result of your actions. Your own injuries aren’t covered. Neither is damage to your personal property. Damages resulting from willful criminal acts aren’t covered by any insurance policy.
Assumed (i.e. contractual) liability isn’t covered by umbrella insurance, either. In other words, if your business’s failure to fulfill a contractual obligation results in harm or loss to a third party, then your business may have to indemnify that party out of pocket.
Umbrella insurance is relatively inexpensive compared to many other types of policies, which can make it an appealing option for individuals who are doing everything in their power to minimize risk. If you would like to learn more about how much umbrella insurance costs and how it can protect you, then we welcome you to contact The Hoffman Agency today. We have served the great state of Iowa for over 60 years, and we are always available when our clients most need us.