Umbrella Insurance for Those Unexpected Rainy DaysUmbrella Insurance covers losses above the limit of an underlying policy, such as general liability, auto liability, workers compensation, and homeowner’s liability insurance. Underlying policies are those that you currently have in place and which have the proper limits of liability. Umbrella Insurance provides the additional limits when required during a lawsuit.
For example, you might have a General Liability limit of $1Million, and you have an Umbrella Limit of $2Million. You and your business are sued for $2.2Million. If you lose the lawsuit, the first $1Million is paid by your General Liability policy, and the remaining $1.2Million would be paid by your Umbrella Insurance policy. If you did not have the Umbrella Insurance policy, you and your company would be responsible for paying the amount covered by the Umbrella Insurance policy. It is a wrong assumption that you only have to pay what you have in insurance coverage. Many businesses and individuals have gone bankrupt because they were wrong about their responsibility.
The following list explains the three key advantages to using Umbrella Insurance
- Provides additional limits when the limits of underlying liability policies are exhausted by the payment of claims.
- Drops down and picks up where the underlying policy leaves off when the aggregate limit of the underlying policy in question is exhausted by the payment of claims.
- May provide protection against some claims not covered by the underlying policies, subject to the assumption by the named insured of a self-insured retention (SIR).
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