It’s the holiday season, and you are throwing a festive party to celebrate the occasion. As the evening winds down, Cousin Ralph, who had a bit too much eggnog, misses the last step and slides down the driveway on the ice. Always looking for a payday, Ralph sues you for injuries, pain and suffering — and for serving him that last toddy.
Your homeowners’ liability policy may cover up to $300,000, but Ralph saw a billboard ad for an attorney wielding a hammer who believes the case is worth half a million. What happens if he prevails?
The answer in many cases is: You pay. A plaintiff who receives a legal award in excess of your insurance limits may generally go after your other assets. Today, $300,000 in coverage may not be enough. That is where a supplemental insurance product called an umbrella policy becomes invaluable.
Umbrella coverage is an additional policy laid on top of your other coverage that can pick up the difference if you experience a liability loss that is greater than your standard limits. This type of supplemental coverage is cheap for the protection it offers, starting at around $200 per year for $1 million in additional protection, and anyone with significant property or financial assets should have it.
The concept of liability insurance in the U.S. began in the late 19th century to address potential hazards faced by employers. Policies were narrowly tailored to cover specific risks like fire, work accidents, vehicle crashes and maritime incidents. As the magnitude of losses increased, a secondary market developed to tack on additional protection, known as excess liability coverage, also covering narrowly defined risks.