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If you own a vehicle, property, or a small business, you likely have liability insurance coverage. Unfortunately, there is always the possibility that a claim could result in a settlement that exceeds your coverage limit. If you do not have the means to pay the difference, you could end with a declaration of bankruptcy as your last recourse. Therefore, many businesses and individuals have an umbrella insurance policy.


What Does Umbrella Insurance Cover?

This type of coverage is also called excess liability insurance in reference to the way it’s used to protect the insured. When a claim is filed against you, your insurance will cover the claim up to your coverage limit. For instance, if the claim is worth $50,000 and your coverage is limited to $10,000, that leaves a $40,000 coverage gap. If you have umbrella insurance, that policy will cover the remaining $40,000.

While you can obtain additional coverage, the average minimum umbrella insurance policy offers up to $1 million. This is adequate for most claims, but larger businesses may need a higher amount. On the $1 million worth of coverage, you may pay as little as $300 per year in premiums. This is a small price to pay for the added protection and sense of security that the policy provides.


What Features Make Umbrella Insurance Worthwhile?

While a homeowner, auto, or small business liability policy does offer a few perks that make coverage even more beneficial, they don’t cover every possible incident. Umbrella insurance is enticing due to the extra types of coverage it offers. For example, it is common for an umbrella policy to provide coverage for claims against you in which you are accused of slander, libel, or defamation of character. Since almost everyone has a website or social media presence, this type of coverage can be especially useful in protecting yourself.

Other areas of supplemental protection include false arrest or imprisonment, malicious prosecution, wrongful eviction, and invasion of privacy. These types of protection can be beneficial for small business owners, but it can also help individuals in defending against charges related to auto injuries or “slip and fall” injuries. While you are unlikely to use all of these protections, you’ll have those resources available if they are ever needed.

Depending on your situation, obtaining umbrella insurance may be a worthwhile precaution. It can help you protect your finances and other assets in the event of a substantial claim. While you hope you will never have to use this type of insurance, it is always better to know you are protected.


Securities and Investment Advisory Services offered through Essex Financial Services, Inc., a Registered Investment Advisor, Member FINRA, SIPC.  A subsidiary of Essex Savings Bank. The securities and insurance products offered through Essex Financial Services, Inc. are not a deposit of, or other obligation of, or guaranteed by any bank, or an affiliate of any bank, are not insured by the FDIC or any other agency of the United States, the Bank or an affiliate of the bank and involve investment risk, including the possibility of a loss of the principal amount invested.