Umbrella Insurance

Umbrella insurance is personal excess liability coverage that extends above your auto and homeowners liability limits. If you cause an accident or injury where the damages exceed what your auto or home policy will pay, the umbrella policy picks up the difference up to its own limit.

The most common umbrella limit is $1 million, with $2 million and $5 million options also available. Premium for a $1 million umbrella typically runs $200 to $400 per year, which is inexpensive relative to the protection it provides.

Carriers require minimum underlying liability limits before they will write an umbrella. For auto, that is commonly 250/500/100 (250,000 per person bodily injury, 500,000 per accident, 100,000 property damage). For homeowners, the typical requirement is 300,000 personal liability. If your underlying limits do not meet those minimums, you raise them first to qualify for the umbrella.

An umbrella protects assets you have already accumulated plus future earnings that could be garnished in a lawsuit. The general rule: if your net worth (plus future earnings capacity) approaches your auto or home liability limits, an umbrella is worth a conversation. For most middle-class families with a house and a couple of cars, the math favors carrying a $1 million umbrella.

Umbrella coverage extends to bodily injury liability (medical expenses, pain and suffering from injuries you cause), property damage liability (damage to property you cause), and personal liability (defamation, libel, slander, false arrest claims in some cases). It does not cover damage to your own car or home, intentional acts, or business activities (those require commercial umbrella coverage).