You’re smart about protecting your family and your assets. You have a homeowners or renters policy for your home and auto insurance for your car. But it still doesn’t seem like you’re doing all you can. You worry that your coverage isn’t enough to protect your livelihood in the unfortunate case you were sued.  

You want peace of mind. You want to go to sleep knowing that you and your family are completely protected from life’s unfortunate mishaps.

That’s where an umbrella policy comes in.

Umbrellas are used to protect you from rain, sleet, and hail. Umbrella policies can also help shield you from anything that may unexpectedly fall on you. Just like you wouldn’t want to get caught in a thunderstorm without your umbrella, you wouldn’t want to get caught in a lawsuit without insurance there to protect you.

What Is Umbrella Insurance?

Umbrella insurance is coined “umbrella” not for the rain but because it is the overarching policy that can be applied to various forms of liabilities. Think of it as supplemental or additional coverage atop your homeowners/renters or auto insurance. Simply put, umbrella policies help extend your limit to account for excess liability.

Accidents happen. If you are in a situation where you cause injury to someone or their property, they could sue you for damages. In the instances where the costs you have to pay exceed the amount that your homeowners’ or auto insurance would cover, umbrella policy steps in for added protection.

For example, say you cause a car accident. The other driver might sue you for $600,000 for damages to their car, medical concerns, and even lost wages—plus court fees. If your auto insurance only covers $500,000, you would have to pay $100,000 out of pocket. An umbrella policy could help cover that additional $100,000, so you aren’t forced to lose savings or assets to pay off the difference.

What Does Umbrella Insurance Cover?

Umbrella insurance covers liability. This means it could provide coverage if you had to pay someone out in a settlement or lawsuit because: you injured them, you damaged their property, or they were injured because of your negligence or on your property. If you are found at fault in a lawsuit, your insurance would help pay for these costs—up to the coverage of your auto or home insurance policy.

Umbrella policies usually act as supplemental insurance for:

  • Bodily injury
  • Property damage
  • Landlord liability
  • Libel, slander, defamation
  • Malicious prosecution, false arrest

Note libel and slander. You can get sued for even posting one nasty comment on social media! This could be considered defamation, cyber bullying, or even mental anguish, which could leave you with a hefty bill. Umbrella policies could help pay out in these cases.

Your umbrella policy may also cover legal fees—even if you are found not at fault or a settlement is reached before going to court.  

Umbrella insurance may also cover your dependent children. If you have a teen driver in the family, an umbrella policy is a must.

If you are a landlord, it’s also crucial for you to invest in an umbrella policy. Landlords require their tenants to hold renters’ insurance, which protects the renter from any personal liability. However, you as the landlord could still get slapped with a lawsuit.

Generally, this occurs if a guest or tenant is injured due to damage on the property or in the facilities, like if they cut their foot on a broken tile near the pool or fell on the steps because of an unstable handrail. Basically, you can get sued for any type of property negligence. This sort of lawsuit can leave you with a huge bill that extends beyond your average insurance policy limits. Umbrella policies can help keep you, your tenants, and their guests safe and protected.

If you have a specific instance in mind that you might want an umbrella policy to cover, talk to an InsuraMatch agent to find a policy that would work for you.

Umbrella policies typically offer a minimum of $1 million in protection, which is generally higher than most homeowners’ or auto insurance payouts. This number usually increases in million dollar increments up to $5 million for higher coverage.

What Will An Umbrella Policy NOT Cover?

It’s important to note that the umbrella insurance we are discussing is for personal insurance only, often called PUP or “personal umbrella policy.” It is not relevant to businesses. This means that it will often not cover business-related liability, even if your business takes place in your home. This would be covered under a professional or business umbrella insurance, which is generally sold separately in tandem with other professional policies.

It will also usually not cover:

  • Personal belonging damages (only property damage of another party)
  • Floods
  • Health insurance
  • Intentional crimes or actions
  • Written or oral contracts (you are facing a lawsuit that had a signed contract involved)

Do You Need An Umbrella Policy?

Ask yourself three questions to determine if you need an umbrella policy:

1. What is the value of your assets? What’s at stake? This includes all properties, possessions, recreational items, assets, savings accounts, investments, retirement funds, and holdings.

2. What is your potential loss of future income? This is generally based on your earning potential. If you lose a lawsuit and don’t have enough money and assets to pay now, the court will often dictate that a portion of your future earnings goes toward paying the lawsuit.

3. What puts you at risk? Below are some of the key risks that make you more susceptible to liability—and thus, in more need of an umbrella policy. 

  • Vacant land (even uninvited guests could sue if they are injured on your property)
  • Pools and trampolines (learn more about summer insurance perils here)
  • Owning a home business that clients visit
  • Construction on property (consider home construction insurance as well)
  • Automobile factors such as high-performance cars, multiple drivers, and teen drivers
  • Rental properties
  • Recreational and transport vehicles (boats, ATVs, motorcycles, golf carts, mopeds)
  • Prominence or fame
  • Entertaining often (at home or elsewhere)
  • Long commutes
  • Driving during rush hour
  • Owning a dog, especially an aggressive breed
  • Serving on a charitable board (non-profits don’t have the same protection for stakeholders that corporations do)

How Much Does An Umbrella Policy Cost? 

In order for you to get an umbrella policy quote, you often need to show proof that you have a certain amount of homeowners’ or auto coverage already. This is especially true if you are purchasing your umbrella policy through a different insurer than your other policies. (We recommend you stay in the same company to avoid headaches with payouts down the line.)

For a $1 million dollar umbrella policy, it will usually cost you a premium of $100 to $300 per year. You can save money by comparing, bundling, raising your deductible, and searching for discounts.

Get a quote with InsuraMatch to find the best price and fully protect yourself with an umbrella policy.

The Bottom Line

If you’ve protected yourself as much as you can with traditional insurance… you may want to consider taking the extra step for additional umbrella coverage. If sued, liability awards can be exorbitantly high, often over a million dollars. Don’t get stuck having to pay out of pocket or put your home, savings, assets, future earnings, and children’s lives at stake.

As they say, when it rains it pours, so you should always have an umbrella handy.