An excess liability policy is commonly referred to as an umbrella policy. This type of policy protects your home (primary and secondary) your cars, and any other type of policy that is eligible for excess liability protection. Most of the time these policies require you to have certain amounts of underlying liability coverage. Umbrella policies vary by company, with some companies combining the home, auto, and umbrella policies under one policy number, and other companies breaking it down to a stand-alone policy.
This coverage is important if you have assets you need to protect. Umbrella policies start at excess limits of 1 million dollars, allowing certain people who meet underwriting guidelines to increase this limit to 2 or 3 million dollars and beyond. This coverage acts as peace of mind if a claim of catastrophic proportions is filed against an underlying policy.
This type of policy does not extend coverage for structures, nor will you see an umbrella pay for damages to fix your vehicle. The umbrella policy is strictly liability. There are many factors that can increase or decrease the premium of these types of policies. One of the most prevalent premium changing factors is the age of the drivers in a household. An example of a basic umbrella policy would include two vehicles and one home with no drivers over the age of 25. Given that, youthful or new drivers are apt to increase an umbrella premium.
The reason youthful drivers affect a premium so greatly has to do with on road experience. Even if a young driver has a perfect driving record, they have not been on the road long enough to gain hands on experience, hence leaving them at greater risk to either make a mistake, or not anticipate other drivers on the road making a mistake.
An umbrella policy will help you in the event that you get sued resulting from a covered claim on any of the policies covered by the umbrella. If the liability limit on the underlying policy has been exhausted, the coverage from the umbrella will kick in and you will have that extra limit available. While it is unlikely that this type of policy will ever be used, it is the peace of mind of knowing that the coverage is available if you should ever need it. This lessens the risk associated with losing assets. While nothing is completely risk-free, it is safe to say an umbrella policy is an excellent way to cover most of your bases.