What is an excess umbrella policy? We own rental property and our agent is recommending we get one.
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Asked October 1, 2012
Excess umbrella liability policies are designed to provide you with liability insurance over and above the minimum coverage in your combined liability coverage. For the owner of rental property, an umbrella policy will extend the maximum amount of your landlord's insurance policy, but it will also extend the liability limits for your own home, your car, and any other insurance policies you have with liability coverage.
A standard homeowners or landlord's insurance policy includes liability insurance for situations where someone or their property are damaged or injured. One example is if someone tripped and sustained a serious cut and another would be if a tree fell on a neighbor's or tenant's vehicle. The problem is that such liability coverage is limited in value, and you may still owe thousands of dollars after your policy has reached its limits. That is where an umbrella policy comes in handy, because it will pick up where the limits of the other policies are reached, extending your liability coverage by the value of the umbrella policy.
Another important factor with an umbrella policy is that it works across multiple insurance policies. For instance, you could use part of your umbrella policy for the balance on an auto accident claim, and then use it again to settle the remainder of a claim filed against you by tenants in your rental property. You must have the initial insurance policy, and that policy must be maxed out before an umbrella policy goes into effect, but such coverage could save your home or other property in the event of having a major liability claim filed against you.
Taking out an umbrella policy is a typical method of providing high amounts of liability coverage across many policies. Because it is not limited to, for example, your rental property, the umbrella policy is especially useful. You can even use an umbrella policy to provide excess liability coverage for multiple rental properties, and an umbrella policy is much less expensive than extending the liability coverage on several different insurance policies.
Answered October 1, 2012 by Anonymous