Resources About Us Careers Login

Here's Why You Might Consider Umbrella Insurance

By Kristin Hoppe

April 14, 2021

You're familiar with auto and homeowners insurance, but is umbrella insurance the right fit for you and your family?

In this article, we'll guide you through umbrella insurance 101, including what's covered and who’s best suited for this policy.

What is an umbrella insurance policy?

In short terms, umbrella insurance is additional liability coverage that supplements your home and auto insurance.

There are essentially two different types of umbrella insurance: personal and commercial.

Should an incident occur that requires payouts from your home or auto insurance, umbrella insurance can supplement those payouts if you have maxed out the amount possible on the former plans.

Umbrella insurance also covers more wide-ranging liabilities, such as libel, slander, business liability, landlord liability, and bodily harm. Additionally, it covers members of your family or household.

Some umbrella insurance policies even cover recreational vehicles like boats, motorcycles, and ATVs — though it depends on the insurer.

For example:
You throw a party at your house and one of the guests is a business owner. He slips by the pool and breaks his right arm and wrist, which makes him unable to work for the next 4 months.

That guest could sue you not only to cover his medical bills, but also to cover his lost wages until he heals and is able to work again. Perhaps your homeowners insurance would cover a small portion of these costs, but once that amount is maxed out, umbrella insurance would cover the remaining costs of these liabilities — ranging from $1 million-$10 million — based on your policy.

Another example:
Your teenage daughter causes a five-car pile up on the highway that results in property and medical expenses for multiple individuals. The total costs of that damage could surpass your family’s assets if the people injured decided to pursue legal action. Umbrella insurance would supplement the costs that your auto insurance does not cover, giving you and your family an extra layer of protection.

What doesn't umbrella insurance cover?

In order to get an umbrella insurance policy, you first need to have base insurance (such as home and auto insurance). If you have a boat you want to cover, for example, you would also need to have boat insurance first and ensure that the umbrella insurance is willing to cover additional liability on your boat.

And while umbrella insurance does cover instances such as bodily harm and libel, it usually doesn't cover any actions that you took with deliberate malice. So, if you get into a physical altercation with someone and break their jaw, that most likely will not be covered by umbrella insurance.

Umbrella insurance also doesn't cover harm that was done to yourself. For example, if you get into a car accident and your auto insurance doesn't cover all of your car repairs or medical bills, you cannot use umbrella insurance to cover your own costs. It's only for the liability purposes of other people.

Lastly, not all umbrella insurance policies cover businesses. That may be a separate kind of umbrella policy, depending on the insurer you choose.

Who is best suited for umbrella insurance?

The more assets you own, the more likely you'll benefit from umbrella insurance. Individuals with a net worth of $1,000,000 or more may benefit most from the policy. Umbrella insurance helps protect those assets.

Those who elect to purchase umbrella insurance may be:

How much does umbrella insurance cost?

According to the Insurance Information Institute, a $1,000,000 personal umbrella liability policy costs about $150-$300 a year. Another million dollars in coverage costs around $75, and $50 for every million following that.

Because umbrella insurance picks up where other insurance leaves off, insurers may require a certain amount of liability insurance on your auto homeowners policy before you're eligible.

Many umbrella insurance companies require $300,000 of liability insurance on your homeowners policy and $250,000 on your auto policy.

Where's the best place to find umbrella insurance?

Many different companies offer umbrella insurance with varying benefits. It's easy to shop online and find the right fit for you. Depending on your circumstance, some of the most popular options include:

Trustworthy Can Help

Trustworthy is the Family Operating System®, an online service that helps your family curate, manage and securely share your important family information so that you have peace of mind, no matter what the future holds.

Our concierge helps you find insurance policies that are the best fit for you and your family. You can learn more about Trustworthy here.