Umbrella Insurance is often referred to as “excess” insurance. This is an insurance policy that can combine with your primary insurance policies, which includes auto, homeowner, and renter insurance policies.
Unfortunately, insurance agents and policy holders often misunderstand the ins and outs of Umbrella Insurance. While the intent of the agent may be great, leaving out a few words may leave you, understandably, steaming when dealing with the aftermath of an auto accident.
What’s so confusing?
A common misconception is that any Umbrella policy that you have will cover you in the event of an accident. In fact, regular Umbrella Insurance policies cover you only if you are sued because of an accident that you caused.
For example: You’re in an car accident for which you are deemed at-fault. The other car was transporting 4 people and they are severely injured. The claim is $1 million. Your liability coverage is $100,000. You don’t have a Umbrella policy. It’s possible that you will be responsible for the additional $900,000. If you don’t have that much money on hand, your assets could be seized.
You can likely see now why an Umbrella policy may be a life-saver if you do have assets.
What if the accident wasn’t my fault?
This is where that disappointment, confusion, and frustration can set in. While an insurance agent may unknowingly represent that you will be covered by your regular Umbrella policy in this case, it is not true.
If the accident was not your fault and you were injured as a result, you will not be able to recover amounts from your own regular Umbrella Insurance policy. If the at-fault driver has a Umbrella policy, you may be able to recover amounts from their policy.
There is an Umbrella policy that will cover you if an accident is not your fault.
Here are those few extra words that I referred to earlier: Uninsured and Under-insured Motorist coverage. If you want to be covered by your own Umbrella policy in the case of a catastrophic accident, insist that you want an Umbrella Insurance policy that contains both Uninsured and Under-insured Motorist coverage.
Doing so will insure that, if you obtain the maximum limit from a negligent driver’s insurance carrier and your primary UIM/UM insurance policy, you may also be able to recover additional amounts under your Umbrella policy depending upon the losses incurred.