A personal umbrella liability policy or personal liability insurance provides additional coverage to an insured in excess of the limits covered by your other standard personal liability policies (Homeowners and Auto). Umbrella liability provides protection for the insured individual's overall net worth (cash savings and other assets) from exposure due to large liability claims or lawsuits. Typically, the standard Texas personal liability umbrella insurance covers:
Damage to another's property and loss of use resulting from such damage
Bodily injury inflicted on another, for which the insured is liable.
Insurance companies offer the personal umbrella policy to protect active enrollees when the liability resulting from negligence exceeds what is covered by their liability insurance. The umbrella policy requires the insured to have an active standard liability policy. If a covered loss occurs, the insurer indemnifies the insured from the standard policy. An umbrella policy then takes over and covers liabilities above what is covered by the base policy.
Both personal umbrella policy and standard policy in Texas provide insurance coverage for when you or a person residing in your home is responsible for accidents leading to bodily harm or property damage to others. However, the personal umbrella liability policy also protects the insured by taking care of the legal charges in the event of a lawsuit. Umbrella coverage kicks in after the limits of the standard personal liability policy end.
So, in simpler terms, what is personal liability insurance?
Under normal circumstances, if your neighbor gets bitten by your dog and decides to sue, you may have to pay for the legal charges, medical bills, and compensation from your pocket. However, if you have an active personal liability policy, the policy will cover the expenses.
The Texas liability insurance is a vital part of residential policies, namely; Homeowners' and Renters' insurance. You can also get it as a stand-alone policy. The coverage provided by this policy extends beyond the insured's home.
So, who needs umbrella insurance? If you have assets such as rental properties, stock portfolio, a collection of automobiles, or significant savings that you want to safeguard from loss - you may need an umbrella policy.
Umbrella insurance acts as a secondary layer of protection, covering the insured in case other policies are exhausted and the insured could be liable for high out-of-pocket costs. If you get sued, your assets may be in danger.
The best example for understanding the concept of umbrella insurance is by imagining a car pile-up: The minimum state-mandated liability coverage for Texas drivers is $30,000 for injuries (per person), up to $60,000 per accident, and $25,000 in damages per accident. If the accident involves a lot of vehicles - this amount of coverage runs out fast. Once auto insurance pays up to it's liability limit, the umbrella coverage kicks in.
The extent of coverage for umbrella insurance in Texas depends on the insured's net worth. Umbrella insurance provides coverage in blocks of $1 million. The first $1 million block of coverage can cost between $150 and $350 per year, while additional $1M coverage blocks are usually provided at a lower cost. This means the insured gets more coverage while paying less premium. The cost of a $2 million umbrella insurance coverage is estimated to be between $250 and $450 per year. The Texas Department of Insurance recommends umbrella insurance to protect all your assets such as:
Home and rental properties
Before purchasing an umbrella insurance policy, it is important to do your research. You need to find out the extent of coverage and determine the net value of your assets. Doing this helps you to compare the amount with the current standard policies in place. If there is a wide difference between the value of the existing auto and home policies and your assets, an umbrella policy may be required to bridge the gap. If you know that you are going to earn more money in the future, you can include a potential income as well while quoting your assets.
The decision as to whether to increase or decrease the liability limits of existing policies depends on your net worth. An increase in liability limit becomes necessary if your existing policy does not provide adequate coverage for all your assets. You can increase the liability limit of an existing policy through one of the following ways:
Purchase an additional liability coverage limit - your policy will only pay compensation to the extent of its maximum limit. An insured may therefore increase their liability limit.
Add a rider to an existing policy - a rider expands your liability policy to cater for more liabilities beyond what the policy would ordinarily cover.
Purchase a stand-alone umbrella insurance policy - an umbrella takes care of any extra liability that your standard policy will not cover.
Increasing liability limits through any of the above methods increases the premium you will be required to pay.
In Texas, umbrella insurance provides overarching coverage for all your existing liability policies such as home, auto, airplane, boat, etc. It also provides coverage against lawsuits involving property damage and personal injury where the insured is culpable.
Lawsuits covered by umbrella insurance policy in Texas may include:
Defamation - a situation where a person damages the public image of another through verbal or written expressions.
False imprisonment - the intentional confinement of a person by another in a specific area without their consent. False imprisonment is often witnessed in kidnap cases.
Landlord liability - occurs when a landlord is held responsible for loss or injury sustained by a renter or guest due to the landlord's negligence.
Invasion of property - occurs when a person intrudes on the property of another without the owner's consent.
Wrongful entry - a situation where an individual gains forceful entrance into the property of another.
Identity theft - is the stealing of an individual's personal information to carry out a crime.
Umbrella insurance covers legal costs that are in excess of the liability limit of your home or auto policy. Whatever portion of liability is left after the insurer pays compensation from the base policy is paid off with umbrella insurance coverage.
Yes, the Texas umbrella policy covers identity theft in addition to other thefts.
A standard homeowner insurance policy provides coverage for theft carried out at the insured's home. An insured may also purchase an overarching umbrella policy that covers identity theft. These policies are added as a rider (optional coverage) to the homeowner's standard policy. The cost of the umbrella policy is then added to the premium for the homeowners' policy.
Under the Texas Insurance Code, personal umbrella liability insurance does not cover the insured in the following circumstances.
Where there are damages to the personal belongings of the insured: Damage to the property or personal belongings of the insured is covered by the renters' or homeowners' insurance policy. As a liability policy, umbrella insurance only provides coverage where the insured is liable for injury to another or damage to their property.
If the damage for which the insured is held liable was done on purpose: Texas umbrella insurance policies only cover damages resulting from accidents. In case of intentional/willful damage to another's property, no compensation will be paid by the insurer.
Liabilities incurred while carrying on with business or professional activities: A business liability insurance is better suited to cover such liabilities.
Injury to people working on your property: Texas employers are required to carry a workman's compensation plan, which covers medical bills and other compensations for employees who get injured while on the job.
Personal injuries: All forms of illnesses or bodily injuries that are not a result of the negligence of another, such as injuries from auto crashes, slips, and falls, are usually covered by health insurance.
You can get umbrella insurance from a Property & Casualty (P&C) Agent licensed in Texas. You can do this through one of the following ways:
Contact your existing insurer to add a rider
Reach out to a trusted Texas P&C insurance agent
Search for a quote online and speak to the company's agent
Visit (or call) a local brick and mortar insurance agency location.
The cost of personal liability insurance in Texas ranges between $150 and $350 per year per each $1 million coverage. The pricing may vary from one insurer to another (discuss your insurance needs only with certified Texas insurance professionals)
Carry enough coverage to cover your needs and not much more
Prior to purchasing an umbrella policy, increase the liability coverage on your auto and homeowners insurance.