Personal Umbrella Insurance
Extra liability protection beyond your home and auto policies—because a single lawsuit could exceed your coverage limits
Why Consider Umbrella Coverage: Auto and homeowners policies typically limit liability coverage to $250,000-$500,000 per occurrence. However, serious accidents or lawsuits can result in judgments that exceed these limits—and you may be personally responsible for the difference.
What Is Personal Umbrella Insurance?
Personal umbrella insurance is an excess liability policy that provides additional protection above and beyond the limits of your underlying insurance policies—typically your auto, homeowners, and watercraft insurance. Think of it as a safety net that catches you when claims exceed your primary coverage.
For example, if you cause a serious car accident and the injured party's medical bills and lost wages total $750,000, but your auto policy only covers $300,000, you could be personally liable for the remaining $450,000. An umbrella policy would help cover that gap.
Beyond extending existing coverage, umbrella policies may also cover certain liability situations that your primary policies exclude, such as libel, slander, false imprisonment, and invasion of privacy claims—providing broader protection for your financial assets.
Quick Facts
- Coverage typically starts at $1 million
- Sits "on top" of underlying policies
- May cover claims primary policies exclude
- Includes legal defense costs
- Provides worldwide protection
How Umbrella Insurance Works
Primary Policy Pays First
When a covered incident occurs, your underlying policy (auto, home, etc.) pays claims up to its limit. For example, your auto policy might cover the first $300,000 of bodily injury liability.
Umbrella Covers the Excess
Once your underlying policy limit is exhausted, your umbrella policy kicks in to cover additional costs up to your umbrella limit—potentially $1 million, $2 million, or more.
Defense Costs Included
Your umbrella policy typically covers legal defense costs in addition to the policy limits. This means attorney fees don't reduce your available coverage for settlements or judgments.
Example Scenario: Serious Auto Accident
The Situation:
You're involved in an at-fault accident. The injured party suffers serious injuries resulting in $850,000 in medical bills, lost wages, and pain and suffering damages.
Without Umbrella Coverage:
- • Auto policy pays: $300,000 (policy limit)
- • Your personal responsibility: $550,000
With Umbrella Coverage:
- • Auto policy pays: $300,000
- • Umbrella pays: $550,000
- • Your personal responsibility: $0
What Umbrella Insurance May Cover
Typically Covered
- •Auto accidents — Excess bodily injury and property damage liability
- •Homeowners liability — Injuries on your property beyond home policy limits
- •Watercraft incidents — Boating accidents exceeding boat policy limits
- •Recreational vehicles — ATVs, snowmobiles, motorcycles
- •Libel and slander — Defamation claims (often excluded from home policies)
- •False arrest/imprisonment — Wrongful detention claims
- •Invasion of privacy — Privacy violation allegations
- •Rental property liability — Incidents at properties you rent to others
- •Legal defense costs — Attorney fees for covered claims
Typically Not Covered
- •Intentional acts — Injuries or damage you cause deliberately
- •Business activities — Liability from business operations (need commercial coverage)
- •Your own injuries — Medical expenses for you or your family
- •Your property damage — Damage to your own belongings
- •Workers' compensation — Injuries to your employees
- •Contractual liability — Obligations you assumed in contracts
- •Aircraft liability — Incidents involving aircraft you own
- •Professional liability — Errors in professional services
Wondering If You Need Umbrella Coverage?
We can help you evaluate your liability exposure and coverage options.
Who May Benefit from Umbrella Insurance?
While anyone with assets to protect may benefit from umbrella coverage, certain situations can increase your liability exposure:
Property Owners
Homeowners, landlords, and those with multiple properties face increased premises liability risk.
Teen Drivers in Household
Young drivers statistically have higher accident rates, which may increase liability exposure.
Recreational Vehicle Owners
Boats, ATVs, snowmobiles, and motorcycles create additional liability scenarios.
Pool or Trampoline
These attractive nuisances significantly increase injury risk on your property.
Dog Owners
Dog bite claims can result in substantial liability, especially for certain breeds.
High Net Worth Individuals
Significant assets may make you a more likely target for lawsuits seeking larger settlements.
Community Volunteers
Board members, coaches, and volunteers may face personal liability for their activities.
Long Commuters
More time on the road statistically increases the chance of being involved in an accident.
Social Media Users
Online statements can lead to defamation claims—umbrella coverage often includes this protection.
How Much Coverage May You Need?
The Asset Protection Method
Calculate the total value of your assets that could be at risk in a lawsuit:
- •Home equity
- •Savings and investment accounts
- •Retirement accounts (protection varies by state)
- •Real estate investments
- •Other valuable property
Many financial advisors suggest umbrella coverage at least equal to your total net worth.
The Future Earnings Method
A severe injury claim may include the victim's future lost earnings. Consider this scenario:
A 40-year-old earning $60,000/year with 25 working years remaining represents $1.5 million in future earnings—a figure that might factor into a lawsuit judgment.
Some advisors recommend coverage equal to net worth plus several years of your own future earnings, recognizing that judgments could exceed current assets.
Common Coverage Limits
Umbrella Policy Requirements
To qualify for umbrella coverage, you typically need to maintain minimum liability limits on your underlying policies. These requirements help ensure there are no gaps between your primary coverage and where your umbrella begins.
Common Underlying Limit Requirements
Auto Insurance
- • $250,000/$500,000 bodily injury liability
- • $100,000 property damage liability
- • Some carriers may require higher limits (e.g., $300,000/$500,000)
Homeowners Insurance
- • $300,000 personal liability minimum
- • Some umbrellas require $500,000
Watercraft Insurance
- • Typically $300,000-$500,000 liability
- • May vary based on boat size and horsepower
Other Vehicles
- • Motorcycles, RVs, ATVs, snowmobiles
- • Must meet specified liability minimums
Note: Requirements vary by insurance carrier. If you don't meet these minimums, you may need to increase your underlying coverage before obtaining an umbrella policy.
What Does Umbrella Insurance Cost?
Personal umbrella insurance is one of the more affordable types of coverage relative to the protection it provides. Many policyholders can obtain $1 million in additional liability coverage for under $20 per month.
Additional million-dollar increments typically cost less than the first million, making higher limits relatively economical.
- • Coverage amount selected
- • Number of properties, vehicles, and watercraft
- • Driving records of household members
- • Claims history
- • Location and risk factors
- • Whether you have teen drivers
Typical Annual Premium Ranges
Actual premiums vary based on individual factors. Contact us for a personalized quote.
Frequently Asked Questions
- What is personal umbrella insurance?
- Personal umbrella insurance is excess liability coverage that provides additional protection above the limits of your home, auto, and other personal insurance policies. It typically starts at $1 million in coverage and sits "on top" of your underlying policies to cover claims that exceed their limits.
- How much does umbrella insurance cost?
- Personal umbrella insurance is surprisingly affordable. Many people can obtain $1 million in additional coverage for under $20 per month (approximately $150-$350 per year), though costs vary based on factors like assets, driving history, and underlying policy limits.
- What does umbrella insurance cover?
- Umbrella insurance extends liability coverage from your underlying policies (auto, home, boat, etc.) and may cover situations those policies exclude, such as libel, slander, false arrest, and invasion of privacy claims. It also typically covers legal defense costs in addition to the policy limits.
- How much umbrella coverage do I need?
- Coverage needs depend on your assets, income, and risk factors. Many financial advisors suggest carrying enough umbrella coverage to equal your total net worth plus several years of future earnings. Consider factors like home equity, investments, retirement accounts, and any unique liability exposures.
- Do I need to get umbrella coverage from the same company as my auto and home insurance?
- While it's not required, many carriers prefer or require that your umbrella policy be with the same company as your underlying policies to ensure seamless coordination. Bundling may also provide premium discounts.
- Does umbrella insurance cover my business activities?
- No, personal umbrella policies typically exclude business-related liability. If you have a home-based business or professional activities, you may need a separate commercial umbrella or professional liability policy.
Related Coverage Options
Auto Insurance
The foundation of your umbrella coverage for vehicle liability.
Homeowners Insurance
Primary coverage for premises and personal liability.
Watercraft Insurance
Underlying coverage for boats and personal watercraft.
Commercial Umbrella
For business liability protection beyond commercial policies.
Important Information
This information is provided for general educational purposes only and does not constitute insurance advice or policy recommendations. Coverage features described are examples and may not be available in all policies or from all carriers. Actual coverage is subject to the terms, conditions, and exclusions of the policy as issued. Please consult with a licensed insurance professional to discuss your specific coverage needs and options. Stan Steele Agency is licensed in New York State.
Protect Your Assets with Umbrella Coverage
Let us help you explore your liability protection options. For typically less than $20 per month, you may be able to add significant peace of mind.
