Umbrella Insurance
What is umbrella insurance?
If you own a home, car, or boat, you likely have insurance policies that include liability coverage for each. However, the liability limits on these primary policies may not be enough to fully cover a serious accident or lawsuit—which could lead to significant out-of-pocket costs. This is where umbrella insurance comes in.
Umbrella insurance provides an extra layer of liability protection beyond the limits of your home, auto, and other insurance policies.
Accidents can happen unexpectedly, and when they do, the financial consequences can be severe. Umbrella insurance offers peace of mind by helping protect your assets and future income from large liability claims.
What does it cover?
Umbrella insurance extends protection for personal and auto liability losses, including:
Lawsuits resulting from property damage or bodily injury.
Legal defense costs once your underlying policy limits have been exhausted.
Do I need umbrella insurance?
Anyone with assets to protect should consider purchasing umbrella insurance. It’s designed to shield you from financial loss when liability claims exceed the limits of your standard home or auto policies.
Here are a few situations to think about:
Home hazards – A backyard swimming pool can increase the risk of injury-related lawsuits.
Slip and fall incidents – A visitor could get hurt on your property, whether it's your primary residence or a rental property you own.
Teen drivers – If your teenager causes a serious car accident, you could be held financially responsible.
Everyday risks – Even your online activity or volunteer work on a board could expose you to defamation or liability claims.
You should strongly consider umbrella insurance if you:
Own a home or other property
Have significant savings or a high income
Have children, teenagers, or college students in your household
Own one or more vehicles
Rent out property to tenants
Frequently host guests at your home
Without umbrella coverage, a major liability claim could put your home, savings, and future income at risk. In today’s litigious environment, an umbrella policy offers affordable peace of mind and an extra layer of protection when you need it most.
What’s an example of when umbrella would kick in?
Consider this scenario:
You accidentally run a stop sign and cause an accident. The other party is a dentist who sustains injuries requiring hand surgery, leaving him unable to work. He sues you for his medical bills and lost income.
Your auto insurance policy covers up to $500,000 per accident, but the dentist's lawsuit amounts to $650,000. In this case, your umbrella policy will cover the remaining $150,000.
How much umbrella coverage do I need?
Umbrella insurance policies range in limits, typically starting at $1 million in coverage and can go up to $10 million or more. But how much do you need?
A good starting point is to total the value of your assets—the things a lawsuit could put at risk. This includes:
Vehicles (cars, boats, motorcycles, RVs, etc.)
Jewelry, art, antiques, or other valuables
Home equity and any other property you own
Cash, savings accounts, and certificates of deposit (CDs)
Retirement accounts like 401(k)s and IRAs
Investment accounts (stocks, bonds, mutual funds, etc.)
Keep in mind that the specific assets you could lose as the result of a judgment may vary by state.
Once you’ve calculated a rough total, choose an umbrella limit that at least matches—or ideally exceeds—the value of your assets. This helps ensure you're fully protected in case of a major liability claim.
It’s also a good idea to review your coverage periodically and make adjustments as needed. As your financial situation changes—such as buying a new home, earning more income, or growing your investments—it’s important to update your umbrella policy to reflect those changes.
How can I get umbrella insurance?
To purchase an umbrella policy, you typically need to meet certain eligibility requirements:
You must have primary renters, homeowners, or condo insurance with a minimum personal liability of $300,000 (some insurers will require $500,000).
Your auto insurance policy should have a minimum limit of 250/500/100 (some carriers may require higher limits of 500/500/100).
Your claims history and driving record must align with the insurer's requirements.