Umbrella insurance—also referred to as excess liability insurance—protects you and your assets if you’re sued for damages and have reached the limits of your home insurance or auto insurance policy. In the event of an accident, umbrella insurance is a form of fail-safe coverage. This article goes more in-depth about umbrella insurance, how it works, and if it might be the right choice for you.
How Umbrella Insurance Works
Umbrella insurance coverage can only be purchased if you already carry auto insurance, homeowners insurance or another type of insurance policy, as it is a supplemental policy, not a standalone. Your umbrella insurance policy pays the difference between what your primary insurance can cover and what you still owe. The best policies will protect assets such as an inheritance, your salary, future earnings, retirement funds and savings in the case you’re liable as a result of an accident.
Umbrella Insurance Coverage
Umbrella insurance covers the policyholder and other members of the family or household against lawsuits involving personal injury to others, property damage and other claims that are dependent on your policy.
Uses for umbrella insurance coverage:
- Bodily injury liability
- Property damage liability
- Personal attacks and character defamation
- Property damage and injuries sustained by tenants at a rental property
- Personal legal defense costs
What does umbrella insurance not cover?
An umbrella insurance policy would typically not cover:
- Personal property: Umbrella insurance would not cover any damage you do to your own property
- Business losses: Financial losses to your business or damage to your business is typically not covered
- Criminal or intentional actions: Any intentional harm, criminal acts or damages to someone or someone’s property would not be covered
- Contracts: Liability that arises from a contract is typically not covered
How much does umbrella insurance cost?
Umbrella insurance is one of the more affordable forms of insurance coverage. Policies are typically sold in $1 million increments and offer at least $1 million in coverage. A $1 million policy typically runs $150 to $300 per year, but it varies from person-to-person. The cost per million drops every year for each additional million dollars in coverage. Many policies do have a cap for liability protection.
Do you need umbrella insurance?
Purchasing an umbrella insurance policy is a smart decision for those who own property, have significant savings or own other things that can potentially cause injury such as pools, boats, motorcycles or trampolines. If your chances of a lawsuit are increased from things such as being a landlord, coaching kids’ sports or participating in sports where others can be easily injured, then you could benefit from the protection of an umbrella insurance policy.
Who might benefit from an umbrella policy?
There are several types of people who could benefit from purchasing an umbrella insurance policy. In addition to homeowners with hazards such as pools, trampolines or houses that sit on steep hills, others might benefit from this type of coverage if their chances of a lawsuit are increased due to:
- Being a landlord
- Coaching kids’ sports
- Serving on the board of a nonprofit organization
- Regularly posting reviews of products and/or businesses
- Participating in sports where others can be easily injured, such as skiing, surfing, hunting, etc.
How much umbrella coverage do I need?
The best umbrella policies will cover your net worth, but don’t forget to factor in future earnings when you look at your coverage needs. Umbrella insurance policies are often sold in $1 million increments and offer at least $1 million in coverage.
A basic $1 million umbrella policy can often cost between $150 to $300 a year. The premium cost per million drops each year for each additional million dollars in coverage. Most umbrella insurance policies have a cap on the amount of liability protection.
If you’re worried about meeting your coverage needs, SelectQuote can help you determine how much umbrella coverage is needed for your situation.
Why You Should Add Umbrella Insurance to Your Home and Auto Insurance — Excess Liability Coverage
While no one can anticipate additional liabilities, an umbrella insurance policy acts as a safeguard between you and unexpected costs. If the total value of your assets, retirement savings, college savings, investment accounts and home equity is greater than the liability coverage of your home or auto insurance, you should consider purchasing an umbrella policy. In the case of a lawsuit, the more you have to lose, the more you’ll want an umbrella policy.
Let SelectQuote Shop Umbrella Insurance Quotes For You
Umbrella insurance is a great way to find peace of mind, as you’ll know that your hard-earned assets are protected. Whether you’re shopping for the best umbrella policy for extra protection or have questions about the best insurance companies for auto, home and umbrella coverage, we can help. At SelectQuote, we can find you the right price for coverage, in a convenient, hassle-free way, making sure you are confident in the policy that will protect your loved ones and possessions.