Umbrella Insurance

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What is Umbrella Insurance?

Umbrella insurance is a kind of supplemental insurance that supplements your existing limits and coverage. Umbrella insurance can cover injuries, property damage, lawsuits, and personal liability situations.

How Umbrella Insurance Works

Though it’s unlikely, should you ever find yourself in a lawsuit where you’re liable for more than your insurance will pay, umbrella insurance will ensure you don’t lose all your savings? An umbrella policy is designed as extra liability coverage to provide this nightmare scenario never happens. Below, we’ll take a closer look at how an umbrella policy works and who needs it:

If you were ever to lose a lawsuit for an amount more significant than what your insurance would pay, you could stand to lose all of your savings. Umbrella insurance is designed as a safeguard against this possibility. We will take a closer look at how this type of policy works, who needs it, and its cost below.

Do you know how an umbrella policy works?

Here are several examples of what an umbrella policy might cover if your homeowner’s or auto insurance isn’t enough:

  • Your dog goes savagely after a neighbor who is going for a walk outside. Your neighbor seeks compensation for medical expenses, missed earnings, and pain and suffering from the attack.
  • If your daughter gets into a fight at school and punches another girl, breaking her nose, the girl’s parents could sue you.
  • You will be held responsible if you cause a ten-car accident and don’t have enough auto insurance property damage coverage to replace all vehicles or personal liability coverage to pay for the medical bills.
  • If your son’s classmates develop food poisoning from the sandwiches you sent for their field trip lunch, their parents could sue you.
  • Your kid throws a bash at your house when you’re gone. If someone brings alcohol to the party and one of the attendees is caught driving under the influence, you could be sued for damages.

Not only does an umbrella policy cover physical damage, but it also protects against malicious prosecution, wrongful entry, invasion of privacy, and other risks.

In summary, umbrella insurance protects not only the policyholder from unfortunate accidents but also other members of their family or close friends. So if you’re ever worried about your teenager’s driving abilities, rest assured that your umbrella policy will most likely cover any medical bills for the injured parties should they be found liable for a significant accident. It’s essential to understand how your policy defines a household member, so you’ll know who is exactly covered under the agreement.

Even though umbrella insurance protects you above and beyond the terms of your homeowners and auto insurance, the incident doesn’t have to involve your house or vehicle to cover it. You’re also protected worldwide, except in the case of homes and cars that you own under different countries’ laws.

Do You Need Umbrella Insurance?

To put it bluntly, people fear buying umbrella insurance because they’re scared of being sued and drained dry financially. With all the news stories about multimillion-dollar judgments against defendants, who can blame them? While we can’t decide for you, we can tell you how likely you’ll find yourself in such a situation to determine better if umbrella insurance is something you need.

You might hear that if the total value of your assets, including standard checking and savings accounts, retirement and college savings accounts, and investment accounts, exceeds the limitations on your auto or homeowner’s liability coverage, you should acquire umbrella insurance. The idea is that you want to have adequate liability insurance to protect your assets from being lost in a lawsuit.

However, if you’re facing criminal charges in Minnesota, USA, and have no motor vehicle insurance coverage, we recommend requesting your policy before being charged. This recommendation doesn’t make sense because jury awards are frequently greater than insurance coverage limits. Everyone is at risk of being sued. Therefore umbrella insurance makes sense in a way. It’s a small cost for the added peace of mind.

However, certain people are more likely to need an umbrella policy than others. You’re a strong candidate for an umbrella policy if you engage in any activity that raises your liability risk.

 Individual liability risk factors include:

  • Owning property
  • Renting it out
  • Employing household staff
  • Having a trampoline or hot tub
  • Hosting big parties
  • Being a well-known public figure

It might help you to know that factors such as having a teenage driver in the family, owning a dog, or even just owning a home with a swimming pool all increase your risk. In short, the more likely you are to be sued, the more seriously you should consider getting umbrella insurance. But anyone who wants to protect themselves from potential lawsuits should consider getting an umbrella policy.

An Illustrative Case of Umbrella Insurance in Action

Let’s assume that your homeowner’s insurance covers only $300,000 in liability. You throw a huge holiday party, and one of your guests falls on your ice-covered steps. She suffers a concussion and significant medical expenses due to the fall. She decides to sue you, so the jury sides with her party guest and awards her $1 million in damages. Your homeowner’s insurance liability coverage is $700,000 higher than this judgment.

You must pay the $700,000 yourself if you don’t have a personal liability umbrella. The retirement account is where most people would keep their primary savings, likely where the funds will come from. It’s highly detrimental, and it means you’ll have to work an extra ten years, find a higher-paying job, or drastically reduce your expenses to replenish your savings and return on track to retire.

If you have $1 million in umbrella insurance, your umbrella policy will cover the portion of the judgment that your homeowner’s insurance does not. Your retirement savings will be secure, as well. The umbrella policy will also pay for any attorney fees and other legal expenses incurred due to the lawsuit that was not covered by your homeowner’s policy. That extra coverage is worth another $1 million.

You’ll pay the total amount out of pocket if you have a $5,000 deductible on your homeowner’s insurance. Then the homeowner’s policy will cover the next $295,000, bringing you to the $300,000 policy limit. Because your umbrella insurance does not have a separate deductible in this situation, since part of the loss was covered by your homeowner’s policy, it does not affect how much it costs. Your umbrella insurance covers the remaining $700,000 of the judgment and legal fees and costs, so you’re only out-of-pocket $5K for a $1 million verdict.

What if you were found responsible in a scenario where your homeowner’s or auto insurance did not cover you? Before the umbrella policy kicked in, you’d have to pay an umbrella insurance deductible, also known as self-insured retention.

What Does Umbrella Insurance Cover?

Although not required, an umbrella policy provides additional coverage to an insurance policy. The forms of protection that may be included in an umbrella policy are as follows:

  • An umbrella policy can assist you in paying your legal fees if you are sued for personal injuries or property damage due to an accident. Bodily Injury Liability: If you’re held responsible for someone else’s injuries, you might be required to pay their medical expenses, lost income, and pain and suffering. This includes incidents like those caused by a motor vehicle accident and injuries incurred while visiting your property.
  • An umbrella policy can help you cover the costs of any damage to another individual’s property during an accident deemed your legal responsibility.
  • If you ever need to defend yourself against a claim of libel, slander, or false arrest, umbrella insurance can help cover the legal costs. The policy may also come in handy if you are found liable, as it could help with damages owed to the other party.

It’s also worth noting what isn’t covered by umbrella insurance. For example, your injuries and property damage are not covered. Furthermore, you won’t be reimbursed for damages incurred due to your deliberate conduct or criminal behavior.

What an Insurance Company Owes You Under an Umbrella Policy?

According to the terms of your insurance policy, if you continue to pay your premiums and follow the rules outlined in the contract, your insurance company must provide specific services. For example, once all liability has been used from your initial insurance plan, the umbrella policy will come into play, covering additional costs up to its limits.

If an insurance company unjustly denies your claim or breaks its promises in the contract, or if your insurance company breaches the contract or doesn’t follow state laws, you can file a lawsuit.

Get the Protection You Need Under Your Umbrella Insurance with Cindy Larsen Insurance.

After taking precautions and getting umbrella insurance on top of your other insurance, the last thing you need is to have problems paying for what it’s supposed to cover. Contact an experienced insurance attorney immediately if you’ve been dealing with a company that won’t pay claims or have just been notified of a lawsuit against you for injuries or property damage.

To Contact Cindy Larsen Insurance, please call us at 763-783-1188, or you can visit our office at 2705 Bunker Lake Blvd NW Suite 206 Andover, MN 55304.

Professional Service with a Personal Touch.

Independent Agent with Atlas Insurance

“I stumbled across Cindy Larsen 15 years ago when we bought our first house, I was so impressed with her and we quickly switched all of our autos and toys over to her too. For the past 14 years I have been a mortgage broker, and I see thousands of home owner policies come across my desk so I know when someone is paying too much. I have referred all my clients I can to Cindy, because of the great rates, service, and trustworthiness she has provided our family and all my clients.”


Alexandria, MN

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We understand getting insurance moved over can be a hassle. That’s why our service and process exist to make it most convenient for you.

Cindy Larsen Insurance

Independent Agent with Atlas Insurance

2705 Bunker Lake Blvd NW Suite 206
Andover, MN 55304

Office: 763-783-1188
Text: 763-296-2810
Fax: 763-754-4028

Monday – Friday 8 am to 5 pm

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