Most insurance is specific to a certain realm. Car insurance typically covers damages inflicted by a motor vehicle and homeowner’s insurance covers damages and liability related to a home.
Umbrella insurance is something else. It is a form of legal liability insurance for an individual person or a family. It can be used as a source of money that goes above and beyond other types of insurance.
For example, say you have a car insurance policy that covers $100,000 and you have the worst day of your life and cause $300,000 worth of damage. Your car insurance policy would only cover that first $100,000 and you’d be on the hook for the rest.
If you had umbrella insurance, which may be up to $1 million or $2 million, you could have the umbrella insurance cover the rest of the damages.
It’s called “umbrella” insurance because it covers so many different areas at once. It’s an extra safety net available that can give you peace of mind and help you sleep at night. It only applies to severe cases, but those are the cases where it is needed the most.
Most of us don’t think of ourselves as negligent, but even small mistakes can have dire consequences.
Let’s say you put your bag down on the staircase in a store for a minute and someone trips over it, falls down the stairs and breaks their neck. Legally, that’s your fault for putting that bag on the staircase knowing full well that it’s a place where people are going to walk. The umbrella coverage would kick in for that scenario because you committed a negligent act, and someone got hurt severely.
The only way someone can collect the money from the umbrella insurance coverage is to sign a release that blocks them from suing you ever again over the matter. They always agree to those terms.
The rub is the have to ask for it. Insurance companies are not obligated to tell anyone that their client has umbrella coverage, but they have to be honest when asked. A lawyer who knows what they are doing will ask, and our firm has benefited from knowing when to ask.