Who needs umbrella insurance?
If you have assets and savings you want to protect beyond the maximum liability coverage you're able to purchase via your home or vehicle insurance, umbrella insurance can protect your assets up to $5 million or more, depending on the insurer. For example, since most homeowners insurers don't offer liability coverage beyond $500,000, you may need umbrella insurance to protect your assets from personal liability claims if your net worth exceeds $500,000. Otherwise, your assets will only be protected up the amount on your existing policy, and a costly accident could result in you losing what you've worked hard for.
How does umbrella insurance work?
Umbrella insurance works as a secondary layer of liability protection in addition to your personal liability coverage and other vehicle liability insurance coverage. It helps protect your assets from liability claims made against you that exceed your liability limits. Consider these five examples of how umbrella insurance could work to protect your assets:
- Vehicle accident: You're found liable for an accident that resulted in personal property damage and/or bodily injury costs that exceed your standard policy's limits. Umbrella insurance can cover the excess liability costs up to your umbrella policy's limit.
- Injury on your property: Someone is injured while on your property or on a property you've rented out. The injury costs you're liable for exceed your personal liability limit, and your umbrella insurance can cover those liability costs up to your umbrella policy's limit.
- Dog bite: Homeowners insurance coverage for dog bites differs by insurer, but if your dog bites someone, resulting in medical or legal costs that exceed your personal liability coverage, umbrella insurance can offer coverage.
- Lawsuit: A person or business brings a personal injury lawsuit against you and you're found liable for bodily injury, slander, libel, or defamation. Depending on your insurer and policy, umbrella insurance may provide coverage for what you owe and the associated legal costs, if they exceed your other applicable insurance policy's limits.
- International incidents: Depending on your policy, umbrella insurance policies may provide coverage for incidents that happen abroad and you're found liable for, even if your other policies don't offer international coverage.
Do I need an umbrella policy?
To determine if you need an umbrella policy, calculate your net worth (add up your assets and savings, and subtract any debts), and find out your current liability limits. If your net worth exceeds your liability limits, ask your insurer if you can increase your coverage. If the maximum liability coverage you can get via your vehicle and homeowners policies is still less than your net worth, you'd need umbrella insurance to cover all of your assets. Note that while umbrella insurance can provide helpful coverage, it's not required by law.
How much does umbrella insurance cost?
Umbrella insurance can be affordable, especially considering the small premium you pay for the broad protection you receive. Typically, an umbrella policy costs around a few hundred dollars per year for $1 million of coverage, depending on the insurer. Progressive offers personal umbrella insurance with coverage limits up to $5 million. Your umbrella policy also applies to family members in your household.
What is not covered by an umbrella policy?
Umbrella insurance isn't a ticket to be reckless or unruly. An umbrella policy won't cover criminal activities or intentionally harmful acts. It also won't cover injuries to you or damage to your property. If you own a business, personal umbrella insurance doesn't double as commercial umbrella insurance; you'd need to purchase a separate commercial umbrella policy.
Do I really need an umbrella policy?
If your net worth exceeds the maximum liability coverage you can get via your standard insurance policies, you'll need an umbrella policy to help protect your assets in case you're found liable for an incident that has devastating financial repercussions. Accidents happen, and you may need umbrella insurance if you want your finances and assets to be fully protected.