How do umbrella claims work?

Claims typically start with primary insurance, transitioning to umbrella when limits exhaust or for umbrella-specific coverages.

An umbrella policy acts as an additional layer of protection that goes beyond the limits of your primary insurance policies, such as homeowners, auto, or boat insurance. When a claim is made, it first goes through your primary insurance. If the claim exceeds the maximum amount your primary policy will pay, the umbrella insurance kicks in to cover the remaining costs, up to its own limit. Additionally, umbrella insurance can provide coverage for certain claims that are not covered by a primary policy, like libel or slander. Essentially, it provides extra security against major claims and lawsuits.

Imagine you're involved in a car accident where you're found at fault, and the damages and medical expenses amount to $600,000. If your auto insurance covers up to $300,000, your personal umbrella policy can cover the additional $300,000, preventing you from paying out of pocket. This extra protection is vital, especially when legal fees and settlements exceed primary policy limits.

Consider purchasing an umbrella policy if you have significant assets you want to protect, or if you are in situations where you could be at risk for high liability claims, such as owning a rental property or having a high public profile. Typically, umbrella insurance is affordable and can provide peace of mind by covering unexpected situations that might otherwise require substantial financial resources.