Umbrella Insurance

Umbrella insurance refers to liability insurance that is in excess of specified other policies and also potentially primary insurance for losses not covered by the other policies.

When an insured person is liable to someone, the insured’s primary insurance policies pay up to their limits, and any additional amount is paid by the umbrella policy (up to the limit of the umbrella policy).

Commercial

A commercial umbrella policy may be based on a commercial general liability (CGL) primary policy.

Personal

Personal umbrella policies are typically made excess of a person’s homeowner’s and automobile insurance. Coverage varies by the company, and detailed comparisons can be constructed showing the differences. Customers are generally high-net-worth individuals, and in the United States, a trade group called the Council for Insuring Private Clients was formed in 2012 to focus on this market. As of 1995, the largest personal insurer in the United States, State Farm Insurance, reportedly had 1.4 million personal umbrella policyholders in the United States, and in 2008 12% of its customers had umbrella coverage.

Causes of loss

Most personal umbrella losses are related to auto accidents, with a 2013 analysis finding that 78% of claims and 87% of losses related to autos. In a prior 2000-2005 survey, most of the losses were not covered by the underlying policy (“drop-down”), while in 2013 most were in excess of the underlying.

Examples of liability that an umbrella policy may cover that a homeowner’s policy often excludes include:

• False arrest
• Invasion of privacy
• Libel
• Slander