The difference between excess liability and umbrella insurance is that excess liability insurance only increases the limits of an underlying policy. In contrast, umbrella insurance broadens the scope of the existing coverage in addition to increasing its limits. Umbrella insurance can even protect you when you are sued for things like slander, libel, false arrest, and character defamation.
Differences Between Umbrella and Excess Liability Insurance
Does it extend the coverage limits of existing insurance?
Can it supplement coverage for multiple types of insurance?
Does it cover claims that underlying policies do not?
Does it require a minimum amount of existing coverage?
With an excess liability policy, anything not covered by your primary insurance policy is also not covered by excess liability. On the other hand, umbrella insurance will extend multiple existing policies while also covering some claims that aren’t already covered by a liability policy.
You need an umbrella policy if your total assets exceed your car or home insurance policy limits or if you have a high risk of being sued. An umbrella policy is an optional form of liability insurance designed to supplement existing coverage, and it typically costs $150 to $200 annually for $1 million in coverage. As a result, households with a high net worth are the most likely to need umbrella coverage.… read full answer
When You May Need an Umbrella Policy
Your assets are greater than your home or car insurance policy limits.
Your occupation puts you at high-risk for a lawsuit.
You own a trampoline, hot tub, or swimming pool.
You ski, hunt, surf, or participate in another hobby where you could injure someone else.
You own property, especially rental or investment properties.
You have a dog with a restricted breed or a bite history.
You are a public figure.
You own guns.
You frequently host guests.
A common rule of thumb is that households should have an umbrella policy if they have $1 million or more in assets. Umbrella policies are also a good investment for people whose assets will likely increase considerably in the future, as liability settlements can sometimes result in wage garnishment. For example, medical students are often advised to purchase umbrella coverage to protect their future income.
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