Imagine that you’re hosting a gathering at your home for the holidays and a guest slips on your stairs and sues you for their hospital fees. Or, your teenage daughter gets into a car accident and the other driver suffers injuries that cost far beyond your auto insurance liability limit. In both these instances, an umbrella insurance policy will help protect you from paying thousands of dollars out of pocket. Any time you’re found liable or accused in a lawsuit, this policy covers any damage or legal fees related to the incident. 

The unexpected happens, and without an umbrella policy, you may find yourself losing everything you’ve worked so hard for over the years. If you think you might benefit from this coverage option, keep reading.

What is umbrella insurance?

Umbrella insurance is an extension of a current qualified policy. Sometimes called personal liability insurance, this coverage protects you and your assets in the event of legal action. Should you be sued for damages or liability that exceeds the maximum coverage of your current homeowners, auto, or boat insurance policy, an umbrella policy will help cover your costs. 

Not to be confused with excess liability insurance, this policy will help cover additional costs not included in your base insurance policy. 

Who needs umbrella insurance?

Unlike homeowners or auto insurance, umbrella insurance isn’t required and is an optional policy for those who have a high value of assets or are at high risk for being sued. Here are a few examples of individuals who should strongly consider umbrella insurance:

  • You own property — your own or a rental property.
  • You have significant savings or other assets.
  • You own high-risk items that can lead to lawsuits such as a pool, trampoline, firearm, or a dog (note: not all breeds are covered).
  • You have a new driver in your household.
  • You frequently host gatherings at your home.

Your insurance agent will be able to help you determine if you qualify for this type of coverage and can also help you find alternatives for standalone umbrella policies if you don’t meet the minimum requirements. 

What’s covered under an umbrella insurance policy?

In short, umbrella insurance covers you and your family against personal injury lawsuits,  damage to others’ property, and from defamation and liability lawsuits. In addition to the costs directly related to damage, you’ll have coverage for legal costs related to the lawsuit. 

Though it won’t cover costs for personal injury or damage which can be covered by health insurance or your standard homeowners policy, it will cover costs that you can’t cover through any other policy.

What are the pros and cons of umbrella insurance?

When you’re weighing your options for this type of coverage, these are a few of the major pros and cons to consider.

Pros Cons
Coverage starts at $1 million and can apply anywhere in the world. You likely need to have a minimum amount of coverage to your existing policy before you can add an umbrella policy.
Covers others’ injury, funeral, and property damage costs. Your total premium may go up depending on how much extra liability coverage you need.
Applies to your legal defense costs and lawsuits relating to personal attacks. Does not apply to your own injuries or damage to personal belongings.
Offers a significant amount of coverage for a relatively inexpensive premium. Does not cover intentional acts or criminal activity.

How much does umbrella insurance cost?

The cost of umbrella insurance will depend on a few factors, in particular, your overall net worth. Ideally, you want to have enough to cover all your assets, which will vary case by case. To get a rough idea of how much you’ll need, add up the total of all your assets (property, savings, investments), and compare that to your current policy. If you have a big gap between the two, you’ll definitely want to speak with an agent to explore your options for umbrella insurance. On average, a $1 million coverage policy can run from $150-$300 per year.

To find out more about adding an umbrella policy to your existing coverage, call your local agent or head to our website to find one who can help assess your needs.

We hope this guide to umbrella insurance helps you understand your own needs and the options available to you for added coverage. If you have any related questions, please visit our website to find a local agent near you: