In our recent lunch and learn session, we explored the critical yet often overlooked topic of excess liability insurance, commonly known as “umbrella insurance.” This coverage serves as an essential safety net for protecting your assets and future income from unexpected legal claims. Here’s what you need to know.
What Is Umbrella Insurance?
Umbrella insurance is a type of excess liability coverage designed to protect your assets and future income from large claims or lawsuits that exceed the limits of your underlying policies (home, auto, watercraft, etc.). Think of it as a safety net that kicks in when the coverage from those primary policies is exhausted.
For example, if you’re in a serious car accident and found liable for $1.5 million in damages, but your auto policy only covers $500,000, umbrella insurance would step in to cover the remaining $1 million.
Who Needs Umbrella Insurance?
The short answer? Everyone who has something to lose.
While umbrella insurance might sound like something only for the ultra-wealthy, the reality is that more people are vulnerable to large lawsuits than ever before. You should consider umbrella insurance if you:
- Are a professional with high income or future earning potential
- Have a family with teenage drivers
- Own a home with “attractive nuisances” like pools, trampolines, or dogs
- Frequently host guests or entertain in your home
- Volunteer on boards or nonprofits
- Own multiple properties, rental units, or investment real estate
Why It Matters Now More Than Ever
As our guest speaker Ian Chamberlain, a seasoned claims adjuster specializing in high net worth clients, explained, today’s legal environment is significantly more challenging than even just five years ago.
Today’s legal landscape has become increasingly aggressive, with:
- More frequent litigation
- Higher settlements
- Attorneys specifically targeting individuals who appear financially successful
One of Ian’s real-world examples illustrates how quickly things can escalate:
“This is how easy an umbrella claim happens. We had a member insured who was pulling into a parking lot… There was a lady in a wheelchair crossing by on a motorized scooter. Our member knocks her over with his car… She seemed fine at the scene, but that night the woman in the wheelchair passes away because of an aneurysm. So just like that we have now gone from a $50,000-$100,000 claim to a fatality multimillion dollar claim.”
How Umbrella Insurance Works
Umbrella insurance is a standalone policy that provides a secondary layer of protection on top of your existing policies. When a liability event occurs:
- Your primary policy (home, auto, etc.) responds first, covering damages up to its limit
- Once that limit is reached, the umbrella policy kicks in, covering additional costs
- Coverage typically includes medical bills, legal defense fees, settlements, and judgments
Additionally, umbrella policies often provide broader protection against claims like libel, slander, and defamation. They also cover legal defense costs, even if a lawsuit is ultimately found to be groundless.
The Bottom Line
Umbrella insurance is about preserving the financial security you’ve worked so hard to build, even when the unexpected happens. As we saw from the real claims examples shared in our session, liability exposures can come from surprising places and escalate quickly beyond standard policy limits.
In our next post, we’ll dive deeper into how to determine the right amount of umbrella coverage for your specific situation.
Ready to protect your assets with umbrella coverage? Contact our Private Client team at privateclient@brunswickcompanies.com or call 1-800-686-8080 for a personalized consultation.
