What is Umbrella Insurance?
A Personal Umbrella Policy protects you in the event that the costs from a lawsuit are higher than the maximum liability limit on your affected personal insurance policy.
In addition, umbrella liability coverage may also cover certain additional perils which might not be included in your personal liability policies. This could include claims against you for libel, slander, defamation of character, invasion of rights or privacy, wrongful eviction, false arrest, and liability incurred as a result of volunteer work in a non-profit organization.
Most personal insurance providers (for both automobile and property insurance) will offer a maximum liability limit of $2 million. While that may seem high and more than adequate, unfortunately, lawsuits that exceed that amount are not that uncommon.
The challenge
Coverage that protects property is an easy concept for most people to buy into. It’s straightforward to understand and is often mandatory. The need becomes less clear however when it comes to coverage that protects you against legal action.
Many people associate liability claims with businesses or high-income earners. The reality is that most of us are targets for legal recourse, even when going about our regular, low-risk lives. Parents, pet owners, social media users, people who do volunteer work… wealthy or not, we are all vulnerable.
Trends suggest that Canadians are becoming more litigious, and court cases are resulting in larger payouts. And while lawsuits don’t directly result in the loss of personal possessions protected by standard personal insurance policies, people could indirectly lose their assets if they need to come up with the cost of an unexpected settlement.
When you consider the modern hazards that impact our safety (e.g. texting while driving), it’s hard not to appreciate how unpredictable an everyday task can be – or how far a resulting lawsuit can go.
Evaluate your situation
The reality is that accidents occur and unintended consequences from our actions happen on a daily basis. In addition the size of court awards has increased, and lawsuits are more frequent than ever before. Many defendants end up in situations where they find that their primary policy limit is simply not enough, particularly if you:
- Have teenage drivers in your home?
- Volunteer or sit on a not-for-profit organization’s board?
- Travel outside of Canada or own property in the US?
- Own a home, rental property or cottage?
- Own pets?
- Use social media?
If you answered ‘yes’ to any of the questions above you should consider yourself a candidate for personal umbrella coverage.
Overcoming the “it won’t happen to me” mentality
There’s a misconception that court battles are the stuff of TV dramas. In many people’s minds, their ‘boring lives’ are enough protection. Here are four relatable scenarios, however, to demonstrate how a personal umbrella policy could save the day:
Social Media. Personal umbrella coverage protects against libel, slander and breach of privacy. The level of confidence internet users feel when posting from ‘behind the keyboard’ makes it too easy to broadcast messages to hundreds or thousands of people. All it takes is one person to retaliate; whether it’s the proprietor of a restaurant who receives a defaming review, or the parent of a child whose photos are shared.
Teenagers. They’re maturing and finding their independence, which is exciting for parents to see. What can be concerning is the fact that they don’t fully understand the scope and potential impact of their behaviour. And if a dependent is responsible for a damaging action or breach of privacy, the parent may be responsible.
Driving. Mandatory or not, auto accidents are so common that it’s undeniably smart to have this coverage. But base policy limits are relatively low considering the potential damages. When someone is at fault for a collision involving multiple vehicles – especially if any of the victims experience loss of future income or require long-term care – their standard coverage gets eaten up quickly.
Hosting events. Small get-togethers involving close friends and family appear low-risk at first glance. However, unpredictability increases when you add variables like alcohol, pets, or small children. We hope our loved ones wouldn’t sue, but in cases where compensation is needed, the decision to pursue legal action becomes less personal and more about necessity.
A personal umbrella policy is often more affordable than most people would anticipate, and it protects the actions of you and your dependent family members wherever you are in the world. As sensibly as we might go about our lives, we are all subject to the unpredictability of other people’s actions.
If you have questions about this topic our licensed brokers will be happy to assist you in reviewing your options and finding the best combination of coverage and value for your budget and your family’s needs. Call us to discuss umbrella coverage further.
