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Who Needs Personal Umbrella Coverage and Why Do We Need It?


Today, more than ever, it is important for you to carry higher limits of personal liability coverage. In the event of a serious loss, your auto, homeowners, and watercraft policies may not provide enough protection. A personal excess or “umbrella” policy will provide an additional layer of liability protection in excess of (over and above) your primary homeowners, auto and watercraft policies. It offers protection for you and your resident family members against large and potentially devastating liability claims or judgments. In essence, a personal umbrella policy kicks in right where your other underlying liability limits stop.

The following illustrates the reason you would want a personal umbrella policy: If you are at fault in an auto accident and injure other drivers, your auto policy will pay up to the limit. But it the other driver has a good job and cannot work for an extended period because of their injuries, your personal umbrella policy will pick up the additional coverage and defense costs if you are sued—up to the limits of the policy.

Who is covered under a personal umbrella policy? A “covered person” includes you, your spouse or domestic partner, any relative under the age of 25 who is in your care or the care of a relative. All must be residents of the same household. Coverage includes students away at school even if they are residents of a different state or are enrolled in a study abroad program. Additionally, coverage extends to “permissible use”, which includes any person using a covered vehicle or watercraft with permission from the certificate holder or a family member with respect to their legal responsibility arising out of its use.

What are the underlying insurance requirements? Generally, you must maintain $250,000/$500,000 of coverage for bodily injury and $100,000 for property damage or $300,000 combined single limits under your auto policy to avoid a gap in coverage. You must maintain $300,000 of liability coverage under your homeowner’s or rental policy.

Are professional and business activities included? Generally, business pursuits are excluded, although incidental business or incidental farming activities and property liability are often covered. Professional liability is excluded. Vacation or rental housing properties you own are generally covered.

Is a vehicle that is registered under my business covered? Yes, generally coverage is provided for you personally but not for the business. It is important that you and the corporation are named on the underlying auto policy.

Are recreational vehicles covered by the personal umbrella policy? Yes. The policy covers all terrain vehicles, antique classic or replica vehicles, dune buggies, golf carts, motor homes, motorcycles, trail bikes, mopeds, motorized bikes, mini-bikes, snowmobiles, and pedacycles. A single premium covers all of these RVs and the cars you own.

How are defense costs handled on a personal umbrella policy? The policy generally provides unlimited legal defense for covered claims.

What is personal liability? Personal liability risks are covered by the personal umbrella policy and can include the following: libel, slander, defamation of character, false arrest, detention, wrongful eviction, malicious prosecution and invasion of the right of privacy.

Barbara Gracey Backer


Barbara Gracey Backer is the Vice-President of Gracey-Backer, Inc., an Insurance Agency in Delray Beach, Florida specializing in All Lines of Professional and Personal Insurance. She may be contacted at 800-272-6055 X118 or at barbara@gbifl.com.

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