How does an umbrella policy work in Tennessee?

I just purchased auto, home, and umbrella insurance in Tennessee. How does the umbrella insurance work, and what does it cover? Do I really need it? 

Answer:

If you have Tennessee auto insurance, homeowners insurance, renters insurance, or condominium insurance, you also have liability insurance as an essential part of those policies. 

Liability insurance protects you when you or a covered family member causes some type of property damage or physical injury to another person. So your auto liability insurance covers you if you cause a car accident that injures another driver or passenger. And your home liability insurance covers you if someone is injured at your home, or if you or covered family member hurts someone or damages someone’s property (e.g., your child breaks the neighbor’s window with a baseball).

What Does It Pay For in Tennessee? 

A: Liability insurance pays for repairing or replacing damaged property of others. It also pays for medical expenses for injured parties, and it even pays your attorney fees, court costs, and any financial settlements or judgments that you have to pay if you are sued. 

But both your auto insurance and your home insurance have coverage limits that are specified in the policy. If you’re sued, your policy limits may not be sufficient to cover a large financial settlement.

What Specific Types of Claims does an Umbrella Policy Cover in Tennessee? 

A: A Tennessee umbrella policy offers excess liability coverage that kicks in when the limits of an underlying policy have been exhausted. Umbrella insurance typically covers the following types of claims for any person that is covered under the primary insurance:

• Personal injury
• Advertising injury
• Property damage liability
• Slander
• Libel
• Defamation of character
• False arrest, detention, or imprisonment
• Malicious prosecution
• Mental anguish

What else does an umbrella policy cover in Tennessee?

A: Umbrella policies offer “follow form coverage.” This means that the umbrella policy typically covers what the underlying policy does. What’s more, an umbrella policy may offer expanded coverage, including covering you worldwide. So if you cause a car accident while driving abroad, your Tennessee auto insurance policy might not cover you, but your umbrella policy would. 

Umbrella insurance might also cover a few circumstances that the underlying policy does not, such as claims for libel, slander, and false imprisonment. 

Here are some examples of where an umbrella policy might cover you.

• Your dog bites a neighbor who suffers serious injuries as a result. The neighbor sues you for payment of her medical bills, and seeks additional compensation for lost wages and pain and suffering. Your defense costs and the settlement agreement exceed the liability limits of your Tennessee homeowners policy. Your umbrella policy kicks in and covers the excess amount. 
• Your teen son runs a red light and causes a car accident. The other driver and the passenger are injured. They sue you for medical expenses, lost wages, and pain and suffering. The legal fees and financial payouts to the two injured parties far exceed the $500,000 bodily injury liability limit on your auto insurance policy. Your umbrella policy kicks in, saving you from bankruptcy. 

What Are The Qualifications in Tennessee?

A: Keep in mind that you must have a certain level of underlying home and auto insurance in order to purchase an umbrella policy. These requirements vary depending on the insurance company, but typical minimum underlying insurance requirements are: 

• Auto insurance: 
  • Bodily injury liability coverage of $250,000 per person/$500,000 per accident
  • Property damage liability coverage of $100,000 per accident
• Homeowners insurance:
  • Personal liability coverage of $500,000

Some umbrella insurance providers require you to have both your auto and homeowners insurance with them before they will issue you an umbrella policy. 

What are the risks of not having an umbrella policy in Tennessee?

A: You may have heard that only wealthy people or those with a big house or a lot of personal assets need an umbrella policy. And while it’s true that certain people might have more assets to protect — making them more vulnerable to lawsuits — anyone who wants protection from the devastating affects of a lawsuit should at least consider purchasing a Tennessee umbrella policy.

Even if you’re not a high risk individual, you can still be sued at any time. A personal injury lawsuit can result in an award of hundreds of thousands of dollars, or more. Million-dollar judgments are not uncommon. If you caused a car accident and the limit of your liability coverage was $350,000, how would you pay? 

If you don’t purchase an umbrella policy now, be sure to discuss it with your independent agent each year as your situation changes.