A serious accident or lawsuit can exceed your auto or home insurance limits. Umbrella insurance is extra liability coverage that kicks in after those limits are used up, protecting your savings and future income.
How Umbrella Insurance Works
Suppose you cause a major car accident and the judgment is $700,000, but your auto liability limit is $300,000. An umbrella policy can help pay the remaining amount, up to its limit. Most policies start at $1 million in coverage.
What Does an Umbrella Policy Cover?
- Bodily injury and property damage you are legally responsible for
- Certain personal liability claims such as libel, slander and false arrest
- Legal defense costs
- Incidents covered by underlying policies: auto, home, boat and rental properties
What Is Not Covered?
- Your own injuries or property damage
- Intentional or criminal acts
- Business liability (needs a commercial policy)
- Contractual liability in many cases
How Much Does It Cost?
Umbrella insurance is generally affordable relative to the protection it gives, since it only pays after other limits are exhausted. Your price depends on coverage amount, number of vehicles and properties, drivers in your household and claims history.
Who Needs Umbrella Insurance?
- Homeowners with significant savings or equity
- Families with teen drivers
- People who own rental property, a pool, or a dog
- High earners with future income at risk
Final Thoughts
If you have assets to protect, umbrella insurance is one of the most cost-effective ways to add peace of mind. Ask your insurer or agent how much coverage fits your net worth.