Umbrella Policies
Umbrella policies, which provide additional coverage over existing insurance policies, can be highly beneficial for individuals and small businesses. These policies enhance the protection provided by other insurance policies by increasing the coverage amount.
Key Advantages and Exceptions
One significant advantage of an umbrella policy is the additional types of coverage it offers, such as coverage for defamation. Defamation refers to false statements of fact made about someone, likely to harm their reputation, and communicated to third parties. If a person with an umbrella policy that covers defamation is sued for making defamatory statements, they can turn to their insurance company for defense.
It’s important to note that intentional acts are generally not covered by umbrella policies, although defamation is an exception. Understanding the coverage provided by an umbrella policy is crucial.
Additional Information
Umbrella policies are affordable, typically costing less than $500 per year for most small business owners. They offer significant value by providing added protection, especially in today’s social media-driven environment. Posting online reviews or sharing opinions on platforms like Yelp or Facebook can expose individuals and businesses to potential defamation lawsuits based on false statements.
In conclusion, an umbrella policy is an excellent option for individuals and small businesses due to its affordability and extensive coverage, including protection against defamation claims. Considering the ease of posting content online and the potential legal risks associated with it, an umbrella policy can provide significant savings when needed.
Video Transcript
Are Umbrella Policies Worth It for Individuals or Small Businesses?
Are umbrella policies worth it for individuals or small businesses? Umbrella insurance policies are policies that are an umbrella over the other policies you may have. So for example, you might have a homeowner’s policy that covers damage to your home. You might have an auto insurance policy that covers damage to your vehicle or damage you might cause to other vehicles.
How Does This Relate to Other Insurance Policies?
You might have other insurance policies. An umbrella goes over that, and there are usually two purposes for an umbrella policy. First, it enhances the protection you have on all the other policies. It increases the amount of coverage. So for example, in your home, if you have a million dollars in coverage, an umbrella might increase it to three or 4 million.
Does This Cover Defamation?
The other benefit to an umbrella policy is it often adds some additional types of coverage, like for defamation. What is defamation? Defamation is when somebody makes false statements of fact about somebody else, those statements are likely to harm their reputation, and those statements are made to third parties.
So, for example, if somebody said, “John Smith is a murderer and a violent person. He just hasn’t been caught yet.” That’s very clearly defamation, assuming John Smith is not a murderer. In that case, it’s a false statement of fact, has a likelihood of harming John Smith’s reputation because murder is not a good thing, and assuming it was made to a third party if it was posted online, for example.
So let’s say the person who made that statement had an umbrella policy that covered defamation, and let’s say John Smith sued that person. When the person gets sued, they can say, “Oh, I have an umbrella policy. I am going to turn this lawsuit, this claim, over to my insurance company, and they will defend me.”
What Are Exceptions?
Now, there might be some exceptions. Often there are exceptions for intentional acts. Usually, that does not apply to defamation. But, for example, if you go punch somebody in the face and you get sued, usually that is not covered by an umbrella policy, so you do have to look at what does the umbrella policy cover.
What Else Do You Need to Know?
By the way, insurance policies are just contracts. It’s a contract between you and an insurance company that says if I get sued for something, you will defend me and you will cover my liability. And if in exchange for that, I’ll pay you an amount every month or every six months, we call that a premium.
I love umbrella policies because usually they’re not very expensive and they provide a lot of additional protection for you, like defamation. When I say not very expensive, usually they’re less than $500 from my experience for most small business owners, and that’s $500 per year. Second, they are increasingly important in this era of social media where if you post something on social media, like say you give a rating on Yelp about a business, or say you post something on Facebook about your interaction with a product or with a company service these days, companies can sue you for defamation if there are false statements there.
Summary
It’s so easy to post stuff online, so unless you’re the type who’s just never putting yourself out there, I often think an umbrella policy is a great option for individuals and small businesses because it’s so inexpensive and when you need it, it can save you a lot of money.
Conclusion
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