Umbrella Insurance Awareness: Are There Alternatives?

Umbrella Insurance is just not for people who have a lot of assets, but also for those who just want piece of mind; knowing they have added protection against any personal liability. Nevertheless, you might want to read your policy carefully, because there could be some things they might be excluding. In addition to that, over the past few years, it has appeared that you are getting less coverage these days for a higher cost.

Who Needs Umbrella Insurance?

Umbrella insurance takes over where your homeowner insurance stops. You can get them in different increments starting with 1 million dollars and up. You typically need a certain criteria from your insurance company to get the Umbrella insurance. For example: My insurance is USAA. They require at least $300,000 liability insurance on my regular homeowner and auto policy. So, for a one million dollar umbrella policy, it would cost me less than $400 extra a year on top of my homeowner's policy to cover my car and home assets under an umbrella policy.

I have had Umbrella Insurance in the past with my rental properties and always thought I was covered for any liability. Recently, I turned my vacation home into rental property. Yet, this time I used a different insurance company, RLI, and found out there were a lot more exclusions than coverage.

I received the policy from RLI a month after I paid for it through USAA. The policy had an endorsement of Exclusions - big bold letters - ABSOLUTE EXCLUSION - POLLUTION. It then listed what was considered pollutants - any solid, liquid, gaseous or thermal irritant, or contaminant, including smoke, vapor, soot, and the list went on. In other words, I would be more covered if I slander someone versus if someone who would die of smoke inhalation in my rental home.

An Alternative Solution for Umbrella Insurance

Now, you do have to ask yourself the reason why you want umbrella insurance. Questions like - How much am I exposed to risk on a daily basis with the public? Most lawyers will tell you it is a necessity for that piece of mind in this litigious society of ours. Yet, in my personal opinion, unless you are covered beyond the basic homeowner's policy from your umbrella insurance; what good is it when they come back to you in their policy with a bunch of exceptions of coverage.

Once I read the policy, I called up my basic homeowner's insurance company and found out for about $20 more a year; I can get complete coverage for a one million dollar homeowner's basic policy for my liability needs of my two homes I was looking for with the umbrella policy. A lot of course will depend on your record of claims. The point is that you might find alternatives doing the same thing that an Umbrella policy can give you for a cheaper premium.

This is just for the homeowner's liability. However, even with increasing my automobile liability coverage, I also found that it was still a lot cheaper increasing my basic insurance coverage than the total amount of this RLI umbrella policy would be without their exceptions.

So the bottom line is not all umbrella policies have the same protection. You have to find out what your basic policy covers and typically the umbrella policy enhances that dollar amount. Yet, remember if you see exceptions from your umbrella policy, don't assume you have more coverage. Before buying Insurance of any kind, ask for the policy to be sent ahead of time.