A liability Umbrella Insurance Policy is like extra liability insurance that safeguards you against various claims and lawsuits. Thus, it helps in protecting your assets in the following two ways=
- It gives additional liability coverage over and above the limits of your auto and home insurance policies. The liability umbrella insurance policy coverage kicks in when exhausted the liability on the other insurance policies
- It provides cover for those claims which are mainly excluded from other liability insurance plans, including libel, slander, false arrest, etc.
As this policy offers extra cover over and above the defined limit of your insurance policies like car insurance, home insurance, etc.; it is a crucial policy that plays an important role once you exhaust the limit of all your others insurance policies. It means, once the sum insured by all the other policies is exhausted, umbrella insurance policies come into the picture to give you additional coverage.
Some of the coverages offered under a standard umbrella insurance policy are-
- Any damage or loss caused to your property
- Different types of lawsuits and legal proceedings
- Bodily Injury Liability= The situation where you have harmed another person’s body or caused harm in any other way, the Liability insurance policy will come forward to cover you against various losses or damages like you would be covered for your medical bills. There are certain circumstances under which it will be held valid are=
- When a loss or accident caused by your vehicle
- If the injury happens due to falling inside your premises
- Injury caused by your pet animal
- Property Damage Liability= It covers those costs which you would have to incur in case of damages to a third person’s tangible property in various incidents like a car accident, mishandling of belongings of a third party, losses or damages caused by your child in a school premise, etc.
The liability umbrella insurance policy plays a major role by covering you against liability that may arise due to libel (harmful written statement), slander (harmful spoken words), false detention, etc. It also comprises a prosecution that may happen due to malicious intent.
Since, 2012, R.S Automobiles has established itself in the construction world. The company manufactures various automobile components for buyers situated across the world. Last year, the company faced a tough situation when Rajan, a buyer filed a case against him. As per Rajan, he was riding a motorcycle when the tire of his bike burst and caused severe injuries. Here, Rajan filed a case against R.S Automobiles as the tires manufactured by them failed to withstand the excessive heat.
R.S Automobiles had product liability insurance, and therefore, the company approached the insurer for the claim settlement. Here, R.S Automobiles had a product liability insurance which was offering the cover of Rs 10 lakh. The total claim filed by Rajan was Rs 12 lakh. Here, product liability insurance paid Rs 10 lakh, and the remaining Rs 2 lakh R.S Automobiles has to pay itself.
However, the situation would have been different if R.S. Automobiles had purchased an umbrella insurance policy. The umbrella policy would have helped in covering the amount which was over and above the sum insured of the company’s product liability insurance policy. It means, here, the umbrella insurance policy would have covered the remaining Rs 2 lakh and R.S Automobiles would not have to pay anything from its pocket.
Situated in Nagpur, L.S Hospital is a multi-specialist hospital, offering impeccable medical facilities to patients from both India and abroad. A few years ago, the hospital had to deal with a legal case, filed by one of the patient’s families. Took the patient, Raghu to the hospital after he complains of severe chest pain. The initial medical reports suggested a mild heart attack and to control his health; doctors gave him some medicines. However, soon after taking the medicines, the condition of Raghu deteriorated further, and he died.
Later they found that Raghu was allergic to certain medicines given to him. Here, relatives of Raghu filed a case against the doctors who attended him and gave him medicines without checking his medical history.
As L.S Hospital had bought an errors & omission insurance policy for all its doctors, it approached the insurance company for the claim settlement. Here, held doctors guilty and asked to pay Rs 70 lakh to Raghu’s family who was also the breadwinner. As errors & omission insurance policy had coverage of Rs 50 lakh only, the remaining Rs 20 lakh was paid by the hospital itself.
The situation would have been different if L.S Hospital had an umbrella insurance policy. The policy would have paid the remaining Rs 20 lakh to Raghu’s family on behalf of the hospital.