A personal umbrella policy adds an extra $1 million to $5 million of liability protection on top of your home and auto policies, often for less than $30 a month. It is the simplest, most affordable way to protect your savings, future earnings, and assets from a major lawsuit.
What is umbrella insurance?
Umbrella insurance is excess liability coverage that activates after the underlying limits on your home and auto policies are exhausted. It also covers a few situations your underlying policies do not, such as certain claims of libel, slander, and false arrest.
Why you need it:
- A single serious at-fault auto accident can exceed your auto liability limits
- Lawsuits target savings, home equity, retirement accounts, and future wages
- Cost is low relative to the coverage- typically $200–$400 per year for $1M
- Recommended for anyone with teen drivers, a swimming pool, dogs, rental property, or significant assets
- Provides legal defense costs above and beyond your liability limits
What it typically covers:
- Bodily injury you cause to others (above underlying limits)
- Property damage you cause to others (above underlying limits)
- Personal injury claims (libel, slander, false arrest, invasion of privacy)
- Legal defense costs
Frequently asked questions:
How much umbrella coverage do I need?
A common rule of thumb is at least equal to your net worth, and often higher to protect future earnings. $1M is a typical starting point; $2M–$5M is common for higher-net-worth households.
Does my umbrella cover business activities?
Personal umbrella policies are designed for personal exposures. Business activities require a separate commercial umbrella policy.
What underlying coverage is required?
Most umbrella carriers require a minimum of $300,000–$500,000 liability on home and auto policies before the umbrella will sit on top.