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The Best Liability (Umbrella) Insurance in 2016

Bridget Sielicki

Liability insurance, also known as umbrella insurance, is a smart choice if you have a lot of assets you want to secure in case of a lawsuit. While initially this coverage may seem like something only the wealthy should pursue, the truth is that anyone can be the victim of a lawsuit. If you own your own home, have retirement savings or keep money in the bank, you should consider this general liability insurance. In the rather litigious society we live in today, even driving a car carries the danger of a lawsuit. If you hit another driver on a slippery road and that driver sues for damages, your car insurance might not provide enough coverage, leaving you on the hook for hundreds of thousands of dollars. If you own property or have investments, umbrella insurance can protect these important assets from being repossessed in litigation.

How to Choose Umbrella Liability Insurance

While you might know that you want this coverage, it can be difficult to determine where to buy it or how to know that you’re getting a good deal. When comparing providers, be sure to keep the following in mind:

  • Make sure you choose a company that’s financially sound and can fiscally back your coverage. A.M. Best ratings are a trusted way to determine the financial strength of an insurance company. You can feel secure with an insurer that carries an A+ or A++ rating.
  • Make sure your liability coverage includes all the activities you like to do. If boating is a hobby, make sure your boat is covered — you don’t want to find out the hard way that you aren’t protected. This insurance may also cover you for renting certain items, like a Jet Ski or snowmobile, but that coverage must be written into your policy.
  • Make sure you maximize your liability on your other polices in accordance with your umbrella requirements. For example, if your umbrella policy requires that you maintain $300,000 in liability coverage on your auto insurance, yet your auto policy only covers $200,000, you’re on the hook for $100,000 before the umbrella policy can provide coverage if you get sued.
  • Carefully read the fine print of all policy choices to make sure your coverage is clearly spelled out. Take note if there are any ways you can still be held liable in the event of an accident or lawsuit.

Many insurers require you to have an underlying policy with their company, like an auto or homeowners policy, to purchase umbrella coverage. Umbrella coverage is then added to the underlying coverage. In the event you need to use your umbrella coverage, the insurer maxes out the liability coverage of your home or auto policy before utilizing the umbrella policy. This gives you the benefit of dealing with just one company in the event of a claim, and you have a better chance of scoring a discount for bundling coverage. While it’s common to bundle coverage, it isn’t necessary; some companies offer standalone umbrella coverage. You might consider a standalone policy for one of the following reasons:

  • The financial strength or A.M. Best rating of your underlying insurer is adequate for basic insurance needs, but not as secure as you want for an umbrella policy.
  • You require higher umbrella limits than your general insurer offers.
  • The price of umbrella coverage is simply too high at your underlying insurer.
  • You want umbrella coverage to cover you for a specific hobby, such as boating or all-terrain vehicle riding, and your current insurer doesn’t offer the coverage you need.

Umbrella Policy Providers

Many auto and home insurance agencies offer umbrella coverage, but that coverage varies among providers. Here’s a look at umbrella liability coverage from some of the nation’s top insurers.

USAA

USAA offers umbrella insurance ranging between $1 million and $5 million to those members who already have home and car insurance with the company. USAA umbrella policies are for personal liability only and do not cover any business or professional services. Each USAA liability policy covers you when you travel anywhere in the world, and it extends to all the members of your household.

State Farm

State Farm has an A.M. Best rating of A++, which makes it a smart choice if you want the assurance of a strong liability provider. Along with protecting you for a claim relating to your home, car or boat, this umbrella coverage also protects against personal claims such as libel or slander. In addition to personal liability umbrella insurance, State Farm also has a variety of business liability insurance packages and policies to offer complete coverage for your professional needs.

Geico

As the nation’s second-largest insurer, Geico carries a variety of liability protection options, from personal to professional coverage. The company carries an A.M. Best financial strength rating of A++, which provides some peace of mind. You can get a liability insurance policy through Geico as long as you have an auto policy with the agency; the insurer does also require you to have homeowners insurance in order to purchase an umbrella policy, but that coverage can come through an outside insurer. Geico requires you to max out your auto policy liability limit at $300,000 before buying a Geico umbrella policy.

AllState

AllState offers personal umbrella policies from $1 million to $5 million. Depending on your liability coverage, you may be protected even if you travel internationally. Additional benefits include coverage for any wages you lose due to a court appearance and the use of an attorney paid for by AllState, though the specifics vary from policy to policy. AllState’s online platform is user-friendly and clearly spells out what might or might not be covered with your extra liability protection.

Travelers

Travelers offers umbrella coverage all the way up to $10 million, making it a wise choice if you have a lot of assets. Travelers receives the highest rating of A++ from A.M. Best, which means you can feel comfortable knowing your assets are secure. A Travelers umbrella policy covers your assets, investments and wages, and it provides coverage for claims like slander, libel, invasion of privacy and defamation of character, which isn’t something you find with every insurer. You can also use this policy to help cover your defense costs or other charges associated with a lawsuit.

Personal Liability Insurance

Almost anyone with assets can benefit from personal liability insurance, but some people benefit from this coverage more than others. If you fall into one of the following categories, you might be more likely to find yourself on the receiving end of a lawsuit:

  • You own property or have home features that might injure others, such as a swimming pool or trampoline
  • You’re a landlord
  • You own a dog (not all insurers cover all breeds, so check to make sure yours is covered)
  • You routinely post reviews of businesses or products
  • You participate in a sport that might injure others, such as hunting or skiing
  • You volunteer

Once you determine that you want liability insurance, you next need to figure out how much coverage you want. This can be difficult to gauge — after all, it’s impossible to predict how much a lawsuit could cost you. In general, you want to make sure you have enough insurance to cover your net worth. For most people, that’s about $1 million, which is the lowest liability coverage you can get from most umbrella policies. After that, insurance companies raise personal coverage by $1 million increments with most stopping at $5 million, but larger companies like Travelers offer a limit of $10 million.

You can even get more coverage than that if necessary, with some bigger-name insurers like Chubb offering coverage up to $50 million. It’s important to check and reassess your umbrella coverage amounts every few years. If you make considerably more money, own more property or consider yourself to be at higher risk for a lawsuit than you were when you opened the policy, you may want to reevaluate your coverage to make sure it’s still adequate for your needs.

Professional Liability Insurance

Personal liability insurance covers a lot of things, and it usually extends to include all the members of your household, but it doesn’t cover everything. It often excludes anything related to a professional entity, even if you own your own business. If you’re a business owner, many of the big insurers also offer business liability insurance, which provides the coverage you need to safeguard your professional assets.

Small Business Liability Insurance

If you’re a small business owner, liability insurance is something you don’t want to overlook. If someone gets hurt on your company’s property or one of your employees damages or hurts another, the liability insurance protects your business assets. This is especially important if you have company vehicles or you travel regularly for work. If you rent your office space, consider this coverage, too; if the property is damaged by a covered loss such as a fire, the liability insurance protects you from an expensive lawsuit should your landlord decide to sue for damages.

The coverage you need for small business insurance varies depending on the perceived risk of your business along with your business location. For instance, a general contractor likely needs more coverage than an IT consultant. Still, liability coverage is generally very affordable and costs far less than the millions that may result from a lawsuit.

What Is Liability Insurance?

You probably have insurance to cover your home and vehicle should an accident happen, but liability coverage on those policies is limited. If you carry a standard auto insurance policy, you might have liability insurance ranging from $100,000–$300,000. If you cause a major car accident and are sued for $500,000, your $300,000 auto policy coverage won’t protect you completely for that lawsuit. You may still owe $200,000 depending on the outcome of the lawsuit, which means your investments and assets are all at risk. If someone sues you, your future earnings are also at stake, as those earnings could be garnished to pay for that lawsuit.

Liability insurance is an extra layer of coverage that picks up where your home or auto policies stop. It provides protection and gives you peace of mind. Coverage levels often start at $1 million and can go much higher, depending on your net worth.

You might think that extra liability insurance is a waste of money, and it’s true that these policies are rarely used, but the chance of a lawsuit might be more common than you think. All it takes is the wrong event to happen at the wrong time, and you may find yourself wishing you sprang for that extra coverage earlier. Here are just a few instances wherein a liability policy might be useful:

  • You start a cooking fire that damages the condo next to yours
  • The next-door neighbor gets injured diving into your swimming pool
  • A babysitter falls and breaks her leg at your house
  • You write an online review of a business and get sued for libel
  • Your dog bites someone at the dog park
  • You’re involved in a car accident with the CEO of a big company, and that person sues you for damages and lost wages

The list can go on and on. There are plenty of instances and situations where someone may receive an injury from you or while on your property. Even if those situations are accidental, you could still be responsible for footing a very large bill.

What Does Liability Insurance Cover?

Liability insurance covers any accidents or claims against you. This means it doesn’t cover your personal belongings (your home and auto insurance can do that), but it does cover you if someone gets injured on your property. In general, you can expect the following coverage.

What Liability Insurance Might Cover What It Won’t Cover
Damage to other property Injuries you receive in an accident
Injury treatment or funeral costs for others Injuries or property damage due to your business activity
Legal defense costs Intentional acts
Property damage or injuries suffered by your tenant Injuries or damages that result from criminal activity

Liability insurance also usually covers you if you rent an item that normally requires insurance, such as a boat. Coverage does vary from provider to provider. For instance, some insurers offer coverage for lawsuits involving slander or personal defamation, while other insurers shy away from this coverage. A variety of providers cover your damage if you crash an ATV on vacation, but others exclude this from their policies. If you’re going to purchase liability coverage, you want to make sure ahead of time that it covers you for every scenario before you sign your name on the dotted line.

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved.
Published September 8, 2016
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