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What is an umbrella policy when buying auto insurance?

August 20, 2015 by Steven M. Gursten

Learn what umbrella insurance covers, and why uninsured and underinsured motorist coverage must be included

Shopping for car insurance in Michigan can be tricky. It’s an area that trips up many attorneys as well, who maybe had a question on No Fault on the bar exam, and nothing since.

First, there’s the auto insurance that’s required under our No Fault Law, commonly referred to as “PIP” or personal injury protection, and which generally refers to your No Fault coverage. Then there is “BI” or bodily injury coverage, that’s meant to pay compensation to someone you injure in an automobile accident.

And then there’s everything else. What many people fail to realize is that there are also several optional coverages that you may or may not need, depending on the age, make and model of your vehicle, as well as where you drive it.

For example, in Detroit, which has approximately 50% of all drivers uninsured, I tell people you have to be crazy to drive there without uninsured motorist coverage to protect you if you’re involved in a wreck with an uninsured driver.

And then there is the umbrella policy. Many of our clients wonder what umbrella insurance offers. We hope this answer helps:

Umbrella policies are excess liability policies that pay injured auto accident victims over and above what your regular auto, homeowners, business, etc. policies pay. This is an optional coverage.

If you purchase an umbrella policy either through your current auto insurance company or through an umbrella insurer, you must make sure that it includes Uninsured (UM) and Underinsured (UIM) Motorist coverages. UM and UIM is insurance that protects you in case of a crash with a driver who does not have No Fault insurance or has inadequate amounts.

You will be required to carry a minimum level of UM and UIM on your regular auto, homeowners, business policies, etc., before they will give you the umbrella coverage.
If your Declaration Page for the umbrella policy does not include UM and/or UIM coverages, that means you do not have them. Umbrella coverage is usually fairly inexpensive. You can buy it generally in increments of $1 million.

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