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Wednesday, June 24, 2020

How Umbrella Insurance Can Turn a Frown Upside Down

By Catherine Powell

Image courtesy pxfuel
In Florida they say it never rains but it pours.  And when the precipitation is coming down in sheets, an umbrella can be worth its weight in gold.  Just as an umbrella helps protect you from inclement weather, there is an insurance product called an umbrella policy that’s designed to keep all kinds of unpleasant things from raining down on you.  In today’s blog, I’ll tell you what makes umbrella policies tick and how you can use them to bolster your existing insurance coverage.

When it comes to insurance, the devil’s in the details.

Whenever you purchase an insurance policy there are always specified limits and exclusions that spell out in writing the maximum amount a policy will provide, as well as certain items and conditions that the policy is not designed to cover.  While that’s all well and good for the insurer, it isn’t always a picture-perfect fit for the insured.  That’s the bad news.  The good news is you don’t necessarily need to start shopping for another insurance company to fill these coverage gaps.  That’s what umbrella policies are designed to accomplish.  They’re designed to pick up where other insurance policies leave off.  Allow me to give you an example:

Let’s say you’re comfortably retired with a home you own and an IRA account that will provide for you for decades to come.  Then one day you’re driving home from the mall when you run a red light and collide with a van that contains a family of five.  Police and paramedics are summoned to the scene.   Both vehicles are totaled, and you wind up walking away with only a few scratches.  However, the family of five whose car you hit broadside isn’t so lucky.  They all wind up being transported to the hospital. It’s a good thing you have full coverage on your auto policy, you tell yourself when you get home. 

Six months later, the family sues you in court and wins a $1,000,000 judgement against you which includes their medical expenses, lost wages to both parents, as well as pain and suffering caused by the crash.  That’s when you come to find that your auto insurance is only going to pay the first $250,000, since that’s the stipulated maximum on your policy.  The other $750,000 is going to come out of your pocket.  So much for your happy retirement.

While the above mentioned tale is fictional, it can happen to anyone in our litigious society.  Make one small mistake, let your attention wander for only the briefest of instants and you could wind up facing a financial calamity.  The way around this dilemma would be an umbrella policy with a $1,000,000 cap which would not only pay out the additional$750,000 the judge levied against you, but it would even pick up the cost to defend you in court.

What else will an umbrella policy cover?

Image courtesy flickr
While having an additional financial cushion that can be put to use in the event that your policy’s liability limits are exceeded, this is only the tip of the iceberg when it comes to the many ways that an umbrella policy can help you cover your assets.  The umbrella can also be used in situations that involve, bodily injury, property damage, and even some civil charges.  Aside from bolstering the limits and limitations on your auto policy, it can also be used in instances where your homeowner’s or boat insurance is involved.

Here are a few examples:

      1.      If a guest, a contractor or courier were to slip and fall in your home, or your dog bites someone while on a walk, the umbrella will cover you for medical expenses and any resulting suits that exceed your homeowner’s policy.

      2.      If your teenage daughter hits the gas instead of the brakes and plows through a storefront, the umbrella will pay for the damages to the property as well as any medical expenses arising from the incident that exceed the limits of your existing auto policy.

      3.      If your toddler were to deface a priceless painting while the two of you visited a friend or neighbor’s house, the umbrella will cover the expense of repairing or replacing it up to the limit of coverage.

      4.      If you rent a houseboat while on vacation and you hit a rock which sinks the vessel, the umbrella will take care of the salvage charges as well as any repairs to the boat.

      5.      It’s not only the judgement that adds up in court.  So do legal fees and court costs.  On your own, you may not be able to afford an attorney who’s best able to defend you in court.  With an umbrella policy you’ll be able to retain most any attorney you wish.  Additionally, filing fees and other court costs will be covered by your insurer instead of coming out of your pocket.

      6.      If you should find yourself being sued for libel or slander, an umbrella policy can be used to pay for your defense.  So too can it be applied in cases of false arrest, invasion of privacy, malicious prosecution and a host of other civil charges.

What doesn’t an umbrella policy cover?

Image courtesy flickr
While umbrella policies are wide ranging, they aren’t all encompassing.  There are certain areas under which an umbrella policy offers no coverage.  These include malpractice, intentional damage caused by you to another person or property, business-related damage, and any injury that happens to you.  That’s what health insurance is created to handle.  Should you exceed the limits of coverage on your health policy, you won’t be able to invoke your umbrella policy to make up the difference. 

How much does an umbrella policy cost?

Umbrella policies start at $1 million in coverage and increase in increments of $1 million from there on.  To acquire an umbrella policy costs as little as $200-$300 per year for the first million and $100 per million thereafter.   That’s right, for less than a dollar a day, you can cover yourself and your family against unforeseen incidents that could turn your life upside down and start raining debt down on you.  Isn’t that what an umbrella is designed to stop?

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more ways to save on flood insurance, check out her website at


  1. It seems like a small price to pay for peace of mind.

  2. Many businesses and some individual buy umbrella insurance. Its relatively inexpensive, yet can save your hide if things go south.


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