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In New Jersey, automobile liability, home owners’ liability, aviation, or boats can create devastating losses. Families need to buy enough liability insurance to cover any realistic potential claim. Umbrella policies cover large complex claims that can happen to anybody.
The essence of liability insurance transfers a known loss (premium) for an unknown loss (claim). The insurance company pools these premiums to bank enough money to pay claims. Because the insurance company does not want the expense of a large number of claims, smaller losses are paid by the risk by way of retentions and deductibles.
The way to avoid compromising your personal assets and not buying high limits on several lines of coverage is to purchase an umbrella policy.
Underlying coverage includes homeowners, auto, aviation, personal injury, boat owners and more.
When any family member damages someone else’s property, homeowner’s liability answers the claim. The amount of this coverage depends on exposures the family faces.
Family automobile covers the risks of operating vehicles on the road.
Aviation, boat, and other specialty liabilities require specific policies designed for those exposures. Liability limits dictated by exposures. The personal umbrella policy covers over underlying coverage. One million dollar umbrella adds $1,000,000 of liability coverage to your auto coverage if needed and your personal liability provided by you homeowners.
Insurance companies offer umbrella coverage to meet this insured demand. Underlying limits may cover most of the claims likely to occur. The umbrella policy contributes to all liability claims rather than just a specialty line. But underlying coverage with specific liability limits must be purchased first. You can think of an umbrella as having very high deductibles (the limits on the underlying policies).
Umbrella liability is complicated, but needed more and more in today’s litigious society.
Have your insurance agent explain carefully the benefits of an umbrella policy. Higher limits will be needed in the near future.
Many insurance companies will negotiate premiums based on handling several policies for the same risk. One way to reduce costs: have your Donnelly and Sproul agent review your general liability, business auto policy, property coverage, workers’ compensation, or business owners’ policy together with the umbrella liability policy.