Demystifying Umbrella Insurance: FAQs and Helpful Tips

A $1 million umbrella insurance policy costs between $150 and $200. However, doubling the coverage to $2 million doesn’t double your premiums.

Your premiums may be tax deductible for commercial umbrella insurance as a business expense. This isn’t usually the case with a personal umbrella policy. That said, covering your excess rental property liability under personal umbrella insurance may qualify the premiums for tax deductions.

To estimate your umbrella insurance coverage, consider factors such as:

• Value of personal assets on the hook if you face excess liability claims
• The degree of your bodily injury/property damage risk as a homeowner, landlord, renter, driver, pet owner, etc
• Your earning potential considering that future income can be a target for liability claims

Umbrella insurance supplements your primary liability coverages, such as:

• Malpractice insurance
  Useful for professionals like lawyers and doctors, an umbrella policy can cover a third-party claim amount above your malpractice insurance liability limit. When choosing your excess liability deductible, consider your malpractice policy limit to avoid a significant coverage gap for which you’d pay out of pocket if there’s a lawsuit against you.

• Water damage
  Although umbrella insurance doesn’t cover floods, it might reduce certain water damage liabilities. It certainly can supplement your rental insurance liability. So if you forgot to turn off your bathtub and overflowing water-damaged expensive furniture belonging to a fellow tenant downstairs, your excess liability protection might come into play.
• Liability lawsuits
  Compensatory damages against you (or an out-of-court settlement) can sometimes exceed your primary liability policy limits. Umbrella insurance is one of the most cost-effective ways to cover any extra bodily injury or property damage liability.

• Landlords insurance
  If you own rental property, it’s a good idea to carry an umbrella insurance policy. It can protect you against excess liability claims from guests injured on your property, such as in fall accidents due to defective stairways, pool accidents, and more.

• Professional liability insurance
  Do you work in a sector like psychology, financial planning, or investment consultancy? You may carry professional liability insurance to cover “bad advice” lawsuits by clients. Umbrella insurance will supplement this primary coverage if you face excess errors and omission liability claims.