Understanding what your personal umbrella policy does and does not cover requires an understanding of what all of your underlying insurance policies cover (home, auto, etc). Most personal umbrella policies extend the liability portion of all of your underlying policies, including automobile, homeowners, motorcycle, boat, RV, and most other specialty policies.
In order to qualify for a personal umbrella policy, you must carry the required coverage limits for liability on each of your underlying policies. Let’s say, for example, your state allows you to carry anywhere from $10,000 to $250,000 in automobile liability. You will not be able to buy a personal umbrella policy to sit on top of your auto liability unless you have the above the minimum limit and meet the insurance carriers limit requirement.
So what if the underlying limit of liability isn’t enough? What if you’re involved in an accident that causes major damage or even a death? You could be sued for hundreds of thousands, or even millions, far exceeding your base limit. That’s what your umbrella policy is for and it would pick up the difference, up to the limit you’ve purchased.
What does a personal umbrella policy cover (and not cover)?
Again, an umbrella policy will offer you expanded protection over and above the coverage you already have. So if you are in a car accident that would normally be covered, your umbrella policy will pick up the difference, if necessary. But what if you are in an accident because you were drag racing or doing something otherwise considered illegal? The illegal action may void your coverage and, as such, void your umbrella policy as well.
In the case of a homeowners policy, your insurance may specifically exclude certain dog breeds. If you buy a policy and then buy an excluded breed, you may not have coverage if that dog bites someone. And just as with your homeowners policy, your umbrella policy would not go in to affect either.
While most umbrella policies will exclude items that are excluded on the underlying policies, there are some exceptions. For example, people with home businesses don’t often realize that business coverage is not part of the standard homeowners insurance policy. If someone were to come to your home as part of your business you might not have coverage if they were hurt and tried to sue you. On the other hand, you might be able to ask your umbrella policy carrier to extend extra coverage options to you.
This, of course, is a grey area and it is important to address all of your personal risks and needs with your insurance professional by adding the right endorsements to your underlying policies. If in doubt, ask your agent so that he can tailor a policy specifically to your needs. It’s always better to be safe than sorry.