How to Insure Your Income: Umbrella Mechanics

Many insurers offer what they call personal umbrella insurance. However, personal umbrella policies are not standardized forms (like the homeowners policies or auto policies). This means umbrella policies can differ from one another in significant ways.

Most of the various personal umbrella policies on the market can be organized into two categories:

• Following form excess policies. These provide high limits over the exact same perils, coverages and exclusions found in all of the underlying policies over which coverage is being provided.
• True umbrella policies. In addition to high limits of liability coverage, these provide broader coverage than is provided by the underlying coverages.

True umbrella coverage will protect your present and future income streams most effectively. It provides three essential things:

• excess limits over underlying policies;
• broader coverage than the underlying policies; and
• defense costs in addition to the limit of insurance, and will defend a claim even if it is groundless.