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Can I Get Umbrella Insurance After an Accident?

Tuesday, May 28, 2024

Umbrella insurance, also known as excess liability insurance, is a type of liability insurance designed to provide an extra layer of protection beyond the limits of your standard insurance policies, such as auto, homeowners, or renters insurance. It can be crucial in safeguarding your financial assets against significant claims and lawsuits that might otherwise exceed the coverage provided by your basic insurance policies. Potentially a valuable safety net! 

But, what if you fail to put that safety net in place before you realize you need it? Will it cover a car accident? Can you be denied umbrella insurance if you purchase it after an incident has occurred but before a claim is filed against you? Will an accident impact your ability to receive coverage in the future? In this article, we’ll answer these and other important questions about umbrella insurance. Let’s get into it.

A woman with braids checks her phone after getting into a car accident.

Understanding Umbrella Insurance

First, we’ll dig a bit deeper into umbrella insurance. The primary purpose of umbrella insurance is to offer additional coverage in situations where the liability limits of your underlying policies have been exhausted. It offers comprehensive protection and helps you navigate the complexities of liability risks with greater confidence.

For instance, if your homeowners’ insurance has a liability limit of $300,000 and you face a lawsuit for $500,000 due to an incident on your property, your homeowners’ policy will cover the first $300,000. The remaining $200,000 would then be covered by your umbrella insurance, assuming your umbrella policy’s limit is high enough. 

In addition, umbrella insurance can also provide coverage for certain liabilities that may not be included in your underlying policies. This can encompass scenarios such as libel, slander, and other personal liability situations. 

Timing & Eligibility for Umbrella Insurance

Let’s look at another example, this time encompassing the question of whether umbrella insurance will cover a car accident. 

If you purchase an umbrella insurance policy before an accident occurs then, yes, the coverage kicks in: when you are found liable for the accident and the damages exceed the limits of your auto insurance policy, your umbrella insurance policy can cover the remaining costs up to its limit. This can include legal fees, medical bills, and other expenses associated with the claim. 

Timing is a crucial factor in the purchase of umbrella insurance relative to an incident. While it is theoretically possible to secure a policy after an incident and before a claim is filed, it is not guaranteed that insurers will provide coverage under these circumstances. Each insurance company has its own policies regarding post-incident coverage, and some may outright decline to issue a new policy if they believe the risk is too high. 

Note that it is generally not considered unethical to buy umbrella insurance after an incident has occurred and before a claim is filed, as long as you fully disclose the incident to the insurance provider. Attempting to hide the incident to obtain coverage could be deemed unethical and potentially fraudulent.

Calculator and money with a notepad

Implications of Recent Accidents on Coverage

Now let’s turn our attention to how recent accidents or claims might impact your eligibility for umbrella insurance and its cost. When assessing risk, insurers consider various factors, including the nature and severity of recent accidents or claims, the frequency of such incidents, and the individual’s overall claims history. 

A single minor accident might not have a substantial impact, but multiple claims or a serious incident can raise significant concerns for insurers. Consequently, insurers might impose higher premiums to offset the perceived increased risk, making umbrella insurance more expensive for individuals with recent accidents on their record.

Moreover, having a recent accident can complicate the process of obtaining umbrella insurance. Insurers may require more detailed information about the incident, including the circumstances, the extent of damages, and any measures taken to prevent future occurrences. They might also conduct a thorough review of your existing insurance policies and coverage limits to ensure that you meet the minimum requirements for an umbrella policy. 

In some cases, insurers may impose specific exclusions or conditions on the policy, such as not covering claims related to the recent accident. This added complexity can make the process of securing umbrella insurance more time-consuming and challenging for individuals with a recent claim history.

Steps When Applying for Umbrella Insurance After an Accident

It’s always advisable to proactively obtain umbrella insurance to ensure you have the necessary coverage in place to protect your assets from substantial liability claims without the complications and potential exclusions that may arise from post-incident policy applications. Of course, we can’t predict the future; sometimes you learn your lesson the hard way. 

By following these tips, you can improve your chances of acquiring umbrella insurance even after an accident. Being well-prepared, transparent, and proactive in managing risk will help you navigate the complexities of the underwriting process and secure the additional liability coverage you need.

term life insurance

1. Gather Necessary Documentation

Compile all relevant documentation related to the accident. This includes police reports, repair bills, medical records, and any correspondence with your current insurance provider. Having detailed information readily available will help insurers assess your situation more accurately and may expedite the underwriting process.

2. Be Transparent with Insurance Agents

Be honest and upfront about your recent accident. Transparency builds trust and ensures that you are fully covered in the event of a future claim. Explain the circumstances of the accident, the steps you have taken to prevent similar incidents in the future, and how your current coverage has responded to the claim. This proactive communication demonstrates your commitment to managing risk and can positively influence the insurer’s decision.

3. Highlight Positive Aspects of Your Risk Profile

Emphasize other factors that showcase your low-risk profile. Mention any long periods of claim-free history, safe driving courses you’ve completed, or improvements you’ve made that enhance safety. These positive elements can help offset the impact of the recent incident and present you as a responsible policyholder.

4. Shop Around & Compare Policies

Different insurance companies have varying criteria for underwriting umbrella policies, especially after an accident. Take the time to shop around and compare quotes from multiple insurers, or leave the heavy lifting to Independent Insurance Associates – we have access to multiple carriers and can help you find the best coverage options.

5. Consider Increasing Underlying Policy Limits

Ensure that your underlying auto, homeowners, or renters insurance policies have adequate liability limits. Umbrella policies typically require a minimum level of coverage on these underlying policies. By increasing these limits, you not only meet the requirements but also reduce the insurer’s exposure, making it more likely that they will approve your application.

6. Demonstrate Risk Management Efforts

Show your commitment to risk management by taking tangible steps to reduce future incidents, such as enrolling in defensive driving courses. Providing evidence of these efforts to your insurer can help mitigate concerns about future claims and demonstrate your proactive approach to liability management.

Want to learn more? Connect with Independent Insurance Associates to discuss your liability limits and see how an umbrella insurance policy may be beneficial to you.