Umbrella Insurance

• You have your base liability coverage (say from your auto or homeowners policy).

• If you’re sued for an amount that exceeds the liability limits of those base policies, the umbrella policy kicks in to cover the excess (up to its own limit).

• Example: Say your auto liability limit is $300,000, a judgment is $800,000 — you’d be on the hook for $500,000 unless you had an umbrella policy that stepped in. (Numbers for illustration only.)

Typical things it covers:

• Bodily injury to others.

• Property damage you’re liable for.

• Legal defense / court costs (for covered liability claims) beyond your underlying policy.

• Some “personal injury” exposures the standard policy might exclude: e.g., slander, libel, invasion of privacy.

Typical exclusions / limitations:

• It generally does not cover damage to your own property.

• It typically does not cover intentional acts, criminal acts, or contractual liabilities assumed.

• If you have significant assets (home equity, retirement accounts, investments) that you want to protect from a large lawsuit.

• If you have greater liability risk: rental property, a swimming pool, boat or ATV, teenage drivers in the household, large gatherings, etc.

• Because lawsuits (and claim sizes) have increased, and standard liability limits may no longer be as safe a cushion as they once were.

Yes, you generally can purchase it whenever you qualify (meeting underlying policy minimums). But it won’t cover incidents that occurred before the policy began.

Umbrella insurance is often surprisingly affordable relative to the coverage it provides — many people can add $1 million in coverage for a few hundred dollars per year, though the exact cost depends on your risk factors, number of underlying policies, and coverage amount.

A common rule of thumb is to carry enough umbrella coverage to protect your total net worth (home equity, savings, investments, and future income), since a judgment against you could otherwise put those assets at risk. Many people start with $1 million and increase from there based on their risk exposure.

Umbrella policies typically require you to carry certain minimum liability limits on your underlying auto, homeowners, or renters policy before the umbrella coverage can apply. Your agent can confirm the specific minimums required by your carrier.

Umbrella coverage can often extend liability protection to rental properties you own, though this typically requires adequate underlying liability coverage on a landlord or rental property policy first.

Umbrella insurance is available for both individuals and businesses. Business (commercial) umbrella policies work similarly to personal ones, providing extra liability protection above your business's underlying policies.