What Is Umbrella Coverage? - NYCM Insurance Blog

Find an Agent

Home Top Ad

Responsive Ads Here

Mar 6, 2023

What Is Umbrella Coverage?

Learn More About What Umbrella Coverage Is and Why You Need It!


Life is unpredictable. One minute you can be relaxing in the backyard, hosting a BBQ and the next thing you know, your neighbor has accidently burned his hand on your grill. This burn ends up preventing him from returning to his job as an electrician the next day. Thankfully, that’s what we have home insurance for…but what happens when home insurance doesn’t cover the full bill? The truth is, we may never truly be able to prepare for all of life’s surprises. However, we can create a contingency plan with “umbrella coverage.”


What is Umbrella Coverage Exactly?

NYCM Insurance defines “umbrella coverage” as an extra layer of personal liability protection above what your automobile or homeowner liability limits will cover. In other words, your standard auto and homeowner policies have limits which apply to both - what they cover and how much they cover. If you find yourself being sued, or somehow responsible for someone else's medical bills, it is not uncommon for the expenses to exceed your standard coverage limits. Under circumstances like these, many insurance providers can offer additional coverage above and beyond what you already carry. Although it may seem unlikely that you’ll ever need this kind of protection, umbrella coverage can come in handy.

Let’s take a look at a few scenarios:


Action Has Been Brought Against You

The reality is, we live in a highly litigious society. Simply put, it is not uncommon for a person to be sued. Imagine you’re driving along one day and suddenly someone runs out in front of your car. You hit the brakes, but you aren’t able to stop fast enough, and you hit them. The paramedics are called and thankfully no one seems to be hurt. You might be a little bit shaken up but other than that, it appears that everyone is okay to leave.  


A few weeks later you receive a notice in the mail stating that you are being sued by the person that was hit in the accident and that you now need to go to court to resolve the issue. In cases like these, umbrella coverage can help protect you and your family from financial difficulty if the judgement or settlement exceeds your underlying policy limits. Without umbrella coverage, the claimant may be able to go after you for your personal assets.


Let’s take a look at another scenario:


Swimming Pools and Other Backyard Hazards

For those who have a backyard pool, trampoline, playset, or pets, having umbrella coverage is a critical component of your home and asset protection strategy. Take for example, your pool. Pools can the perfect place to spend time bonding with friends and family. However, it’s important to know that having friends over to swim in your pool can bring along its own set of risks.


For example, say you are outside supervising the children while your friends are busy putting lunch together. As a safety precaution, you’ve reminded the children not to run near the pool. Unfortunately, your friend’s son has ignored your warning and proceeds to then trip and fall onto the concrete, breaking his arm in the process. Even though you might have thought that you’d be in the clear since you and the child’s parents are friends, you may still be held responsible for some hefty medical bills. Umbrella coverage will help you cover these types of costs. Pools, playsets, trampolines, and pets should all be considered high risk when it comes to having company over.


What Happens If There’s Not Enough Umbrella Coverage?

Umbrella” is the term that is used for this kind of coverage because the coverage functions just as an actual umbrella would. Umbrellas keep you covered when the rain of misfortune is falling. Unfortunately, there are many who continue to go unprotected. According to a report from ACE Private Risk Services “Liability coverage in home and auto policies rarely exceeds $500,000, yet 13% of personal injury liability awards and settlements are $1 million or more.” That is a gap in coverage of half a million dollars which an individual can be held responsible for in the event of being sued. The general rule of thumb for adequate umbrella coverage is to have a policy that is as much as your net worth.


While it may be impossible to mitigate and avoid risks at all times, it’s important to expect the unexpected and set up a safety net to protect your assets. With umbrella coverage you can be better prepared for life’s surprises. For more information about an umbrella policy with NYCM Insurance, reach out to one of our local agents by clicking the link below!