Umbrella Coverage

Umbrella insurance refers to a type of liability insurance that is in excess of specified other policies and also potentially primary insurance for losses not covered by the other policies. When an insured is liable to someone, the insured's primary insurance policies pay up to their limits, and any additional amount is paid up to the limit of the umbrella policy.

Umbrella insurance policies tend to provide broader coverage over one or more primary policies, in that they lack "follow form" clauses, their definitions of what is covered may be broader than the definitions in the primary policies, and they sometimes lack exclusions used in the primary policies. An umbrella policy may cover certain risks from the first dollar of loss or liability incurred, which were never covered under the primary policies. For those risks that are left uncovered by primary policies but are covered under the umbrella policy, the latter is said to "drop down" to cover them as primary insurance and fill in the gaps in the underlying policies. Hence, the "umbrella" nomenclature is a reference to the broader coverage of the policy.

Personal umbrella policies are typically made excess of a person's homeowner's and automobile insurance. A commercial umbrella policy may be based on a commercial general liability (CGL) primary policy.

Examples of liability that an umbrella policy may cover that a homeowner's policy often excludes include:

  • False arrest
  • Libel
  • Slander
  • Invasion of privacy