Umbrella insurance is one of the best ways to protect yourself in case of an unexpected storm. But who needs umbrella insurance? When is purchasing an umbrella policy most beneficial?

What is umbrella insurance?

Umbrella insurance is also referred to as excess liability or personal liability insurance, because it provides a supplemental line of liability coverage in addition to your standard homeowners or auto insurance.

“Liability” refers to any situation when you are found financially responsible for another person’s injuries or property damage. Umbrella insurance is a supplemental policy on top of one or more of your standard policies, like home or auto, but it covers a blanket of various liability concerns.

Umbrella insurance helps cover the following kinds of situations where you could be found at-fault:

  • Bodily injury liability: medical expenses and associated costs for another person’s physical injuries
  • Property damage liability: repair or replacement for damage to another party’s tangible property
  • Personal liability: slander, libel, false arrest or imprisonment, malicious prosecution, mental anguish and shock
  • Legal fees: cost of your defense fees in the lawsuit (whether or not you are found legally responsible)

Keep in mind that liability claims can be incredibly costly—frequently in the hundreds of thousands of dollars range. If you don’t have enough liability coverage, you would be responsible for those exorbitant costs out of pocket. If you don’t have the cash to hand over to pay for the immense lawsuit, they could go after all of your assets and even future assets not yet in your possession.

Not having enough liability insurance is a risk. Umbrella coverage is a way to protect yourself from the financial fallout and hardship associated with liability claims.

But does everyone need umbrella coverage? When is umbrella insurance most recommended?

When is umbrella insurance right for you?

1. If you have significant assets

Let’s say you are found responsible for a huge accident, resulting in four people getting injured and their property damaged. This could be millions of dollars in damages. If you only have $100,000 liability on your auto insurance, you would be responsible for the remaining cost yourself. If you don’t have the cash on hand, they can liquidate your assets to pay the remainder.

The assets they could come after include your:

  • Car
  • House
  • Investment accounts
  • Checking and savings accounts
  • Future income

You want enough liability insurance between your standard policy and umbrella policy to protect all of your assets, so nothing can be taken from you in the case of a major lawsuit. This helps ensure that no matter what situation may arise, you’re not at risk of losing your house or other necessities.

If your standard homeowners or auto policy doesn’t equal the value of your assets, an umbrella policy will provide an additional and higher limit to ensure the total value is covered.

2. If you have potential future income

Even if you don’t have significant assets or holdings now, your future potential earnings can also be a target in a lawsuit.

Let’s say you have only $100,000 in liability without any umbrella insurance. An auto accident lands you with a $400,000 lawsuit. You’re now responsible for $300,000 out of pocket. If you don’t have those $300,000 in cash or assets to hand over, the judge could require that a certain percentage of your future earnings be paid to the plaintiff until the $300,000 is paid off. That means you could be stuck in a financial hole for years, paying a huge debt without being able to grow your own savings.

3. If you own property

Property, especially investment property, is a major asset. That’s one of the first areas to get targeted in a huge lawsuit. You want enough umbrella insurance to cover the cost of your home or investment properties.

Also, property holds more liability risk, because more can “go wrong” on your property. Someone can slip and fall while delivering a package, for example, or your child’s friend gets hurt in your pool. You would be responsible for medical bills and related costs. If you own property, especially with attractive nuisances, umbrella insurance can help protect against these kinds of costly lawsuits.

4. If you own a business 

Businesses are risky. Whether it’s your employees, clients, or partners, there are a lot of potential incidents where your business could cause damages to another party.

In most cases, your business assets will be separate from your personal assets. But it doesn’t hurt to carry personal umbrella liability in the case that a disgruntled employee or customer comes after both you and your business.

Read: 5 Reasons Small Businesses Need Business Insurance

5. If you have a “risky” hobby

Some hobbies inherently carry more risk than others. Skiing or surfing, for example, may seem like individualized sports—but running into a fellow boarder could cause serious injuries. Hunting is also high-risk, because one minor accident could result in major injuries. Team contact sports are also risky, because you could potentially break someone’s arm or cause them some sort of harm while in play. If you often partake in hobbies that could damage another person’s body or property, umbrella insurance can help keep you covered and protected.

Boats and motorcycles are especially high risk for liability. Like an auto accident, one boating or motorcycle accident could costs hundreds of thousands in property damage and bodily injury.

Click to learn how to insure your boat and motorcycle.

6. If you coach youth sports

As a coach, you’re responsible for the health and safety of your players. If a child gets injured while in your care, you could personally be held responsible. Don’t stop coaching your kid’s little league team—consider the protections umbrella insurance can afford you.

7. If you own a pool or trampoline

“Attractive nuisances” like pools, trampolines, and jungle gyms are considered a high liability risk. That’s because they’re both hazardous for injury, and they also attract kids (and kids tend to get hurt more often). If someone is hurt while on your property, you could be on the hook for all of their medical expenses and related costs. This is true even if they’re not a welcome guest!

Learn more about attractive nuisances and how to protect yourself here.

8. If you own a dog

Any dog, no matter how small or mild mannered, is a risk. You never know if your dog will feel threatened and retaliate—even if they’ve been mild their entire lives. Plus, dogs don’t live by the same social rules we do, so they may do damage to another party’s property without even realizing it (like peeing on their rug).

Some dog breeds are considered higher risk than others (your insurance carrier may actually increase your rates if you own certain dogs). An umbrella policy helps ensure you have enough personal liability to protect against dog bites or your pet damaging another person’s property.

How much umbrella insurance do you need?

Umbrella coverage only comes into effect after your standard insurance policy has been exhausted. If you get into an car accident, your bodily injury liability and property damage liability portions of your auto insurance will step into cover any related costs first and foremost. Once that insurance has been exhausted, then your umbrella can step in to help pay the remaining difference.

Say, for example, your auto liability coverage has a limit of $100,000 and your umbrella policy equals $1 million. You get into an accident worth $400,000 in damages. The first $100,000 would be paid by your auto insurance, and the remaining $300,000 would go to umbrella.

Remember that you want enough liability to cover the total value of your assets. This includes both your standard auto or home policy and the umbrella policy. Let’s say your assets equate to $3 million. Your homeowners’ policy covers $300,000 in liability. That means you’ll want at least $2.7 million in umbrella insurance to make up the difference.

Most umbrella insurance is sold in $1 million increments. When in doubt, purchase more umbrella insurance than the value of your assets—especially considering the potential for future income.


Ask yourself the following questions to see if umbrella insurance is right for you:

  1. What is the total value of my assets? Does my standard home and/or auto policy cover this value?
  2. What are my perceived risks? Where and how am I most likely to do personal or property damage to another party?
  3. Do I want peace of mind, no matter what storms may come my way?

Umbrella insurance is one of the least expensive policies—but it provides the highest coverage limits and protection. If you want to help ensure you, your family, and your assets are taken care of, an umbrella policy is a must.


Talk to an InsuraMatch agent now at (844) 824-2885 to see how you can add an umbrella policy to your existing insurance!

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