What is umbrella insurance?
Do you ever wonder what would happen if you needed to file an insurance claim, but you’d already reached the limits of your coverage? That’s where umbrella insurance comes in. Umbrella insurance—also referred to as excess liability insurance—is coverage that provides additional protection beyond your existing home and auto insurance policies. It is a form of fail-safe coverage if you’ve reached the limits of your current policies, and can cover costs if you’re sued for damages after an auto accident, an event at your home or a personal liability situation.
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. It also covers certain liability claims, such as libel or slander. If you own a rental property, umbrella insurance can also provide additional coverage beyond a standard renter’s insurance policy.
Uses for umbrella insurance coverage:
- Bodily injury liability: this covers medical, legal and other expenses for someone who is injured in an auto accident where you were found to be at fault
- Property damage liability: this covers damages to a person’s vehicle or property in an auto accident where you were found to be at fault
- Personal attacks and character defamation: if you are accused of damaging someone’s character through false statements presented as fact, umbrella insurance can cover legal costs and other expenses (such as lost wages due to time spent in court)
- Property damage and injuries sustained by tenants at a rental property: if tenants sue you for injuries or damage related to a rental property you own (for example, if they were to slip and fall in a common area like an apartment pool)
- Personal legal defense costs: if you are falsely arrested or imprisoned, umbrella insurance can help cover the 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: if you own a rental property or multiple properties, the costs associated with tenant damage or injuries may exceed the limits of your landlord insurance
- Coaching kids’ sports: if you coach kids’ sports, you may want to protect yourself from legal action if a team member is injured while in your care
- Serving on the board of a nonprofit organization: nonprofit board members should consider umbrella insurance to protect the organizations’ financial assets
- Volunteering: if you serve as a volunteer coordinator or a similar role, umbrella insurance can help with legal costs if a volunteer is injured or property is damaged during an event hosted by your organization
- Regularly posting reviews of products and/or businesses: if you regularly post reviews, you may have a greater risk of being accused of defamation or slander by the business or product owner
- Participating in sports where others can be easily injured, such as skiing, surfing, hunting, etc.: if you are an athlete or hobbyist who participates in an activity with a higher risk of injury, protecting yourself with umbrella insurance may be a good idea
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 and protect your hard-earned assets. Whether you’re trying to find the best 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 the right coverage for you in a convenient, hassle-free way, making sure you are confident that the policy will protect your loved ones and possessions.