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Updated
Umbrella insurance is an extension to personal liability coverage that offers protection beyond what’s available in a typical home or auto insurance policy. It comes into effect when the payout from your existing policy isn’t high enough to cover the costs of the damage or injuries caused by your car or property to another individual. Basically, if you are sued for more than your standard insurance can cover, umbrella insurance will make up the difference. Additionally, it protects you from vandalism, invasion of privacy, libel and slander.
To get umbrella insurance, you’ll first need to have your basic car or home insurance policy. Even then, umbrella insurance comes into play only if your regular coverage has been used up.
If you own something that may be hazardous to others, such as a swimming pool, or engage in activities that put others at risk, you may want to consider umbrella insurance.
Umbrella insurance is an add-on to your existing liability coverage. If a liability lawsuit forces you to pay more than your standard policy can cover, umbrella insurance will pay for the rest. The umbrella coverage becomes available only when your standard coverage runs out.
Certain things increase the likelihood of you getting sued. Here are some examples:
While umbrella insurance may, at a glance, seem like a ‘Get Out of Jail Free’ card, it doesn’t cover everything. With that in mind, you should know what it does and doesn’t cover to avoid issues down the road.
While we would recommend personal liability insurance to everyone, umbrella insurance may not be necessary for you. Here are some of the reasons to consider adding it to your liability coverage:
Like other types of coverage, umbrella insurance has its own pros and cons. So, if you’re still undecided whether to purchase it or not, here are some reasons to sway your decision in one direction or another:
Most major insurance providers offer umbrella insurance. However, to purchase it, you need to already have home or auto insurance as well as a minimum amount of liability coverage. In addition, your auto or home insurance provider may require you to purchase the umbrella insurance from them exclusively, rather than another company. Even if there is no such requirement, you may want to do so anyway – to secure a home and auto bundling discount.
Before purchasing your umbrella insurance, be sure to check the maximum limit offered by your provider. Most umbrella policies go as high as $5 million, though some go higher. If you want more, you’ll need to look around.
While you’re at it, you may decide to compare quotes between several different insurers. To make this easier, consider using a comparison tool like RATESDOTCA to find the cheapest rates.
Like other coverages, umbrella insurance does not have a set price. It will depend on the amount of coverage you decide to purchase, your province and postal code (since insurance rates vary by location), credit history, driving record (if applicable) and how risky you are to insure. In addition, the more properties or cars you have and the more members of your household you decide to cover, the more expensive your insurance will be.
According to the Insurance Information Institute, a $1 million umbrella insurance policy is likely to cost $150 to $300 per year. If you go for a $2 million coverage, you’ll end up paying about $75 more and $50 for every additional 1$ million. Most coverages start at $1 million and can be increased up to $5 million.
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Need more information about personal liability umbrella insurance? We got you covered.
On the surface, excess and umbrella insurances are very similar. They both offer protection beyond the limits of a standard liability policy, and they both build on top of existing policies. However, they are decidedly not the same.
Excess insurance does what the name suggests – it expands the limits of a standard policy, by offering additional protection to what’s already on offer. For example, if the damages you cause at your job are assessed at $1.3 million, but your standard insurance covers only $1 million, you’ll have to pay the difference yourself. However, with excess insurance, you’ll be covered beyond this limit. Do note that if your standard insurance stipulates that you must be on site when the damage you inflict occurs, then you won’t receive any coverage at all if you happen to be off site at the time. Excess insurance won’t cover you either in this scenario, as it merely expands what your existing policy already offers.
That’s where umbrella insurance differs from excess insurance. While it also expands the limits of a standard insurance policy, that’s not all it does. It provides coverage for things that your regular policy doesn’t. For instance, in the above-mentioned scenario, the umbrella insurance may cover your at-fault damages even if they occur while you’re off site. Basically, umbrella insurance covers any gaps your standard insurance doesn’t, including libel, slander and defamation incidents. That’s why it’s called an ‘umbrella’ insurance.
So, if you’re looking for more comprehensive coverage, go with umbrella insurance. If you’re looking to merely expand your existing policy, pick excess insurance.
There’s no legal requirement for anyone to purchase umbrella insurance in Canada. However, if you’re at a high risk of getting sued by someone or you own a lot of assets, then you may want to consider it.
Here are some of the reasons to get umbrella insurance:
Most major insurance providers offer personal liability umbrella insurance in Canada. However, to purchase it, you need to already have an auto or home insurance policy with them, as umbrella insurance can’t be purchased separately. In addition, your existing insurer may require that you purchase umbrella insurance from them exclusively.
Taras is a content manager at RATESDOTCA, specializing in home insurance. He has worked at the company for a year and has since collaborated with multiple experts to fully familiarize himself with the intricacies of the insurance industry.
He has over nine years of content marketing experience across multiple industries in B2B and B2C spaces. He has produced thought leadership content for organizations like Constellation Software, Facebook and Yellow Pages as well as outlets like Huffington Post and MSN Canada.
He has graduated from York University with a Bachelor of Arts degree in Film Studies and has also studied Technical Communication at Seneca College – the co-op program that introduced him to the world of content marketing.
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