An umbrella insurance policy provides additional coverage outside the existing limits of other policies, like car insurance and homeowners insurance. It offers protection for a number of situations; For example, if you're sued for libel, get into a car accident abroad, or if your dog causes harm to a guest, umbrella insurance can help further protect your assets if these claims aren't covered by existing liability policies.
Umbrella coverage kicks in when the underlying liability limit of an insurance policy is reached, and it's usually sold in increments of $1 million, up to $5 million. The cost of umbrella insurance can range anywhere from $200 on the low end to over $1,000 for a high limit, according to Trusted Choice, with an average cost of about $380 per year providing $1 to $2 million of protection. However, how much you'll pay for umbrella insurance depends on several factors, like where you live, how much coverage you buy and your risk profile.
Use this calculator to assess how much umbrella insurance coverage you need.
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What does umbrella insurance cover?
Most umbrella insurance policies offer coverage for the following:
- Bodily injury: Umbrella insurance can help cover the cost of medical bills and/or liability claims for injuries to another person, whether it's from an at-fault auto accident or an accident in your home (guest falling, dog bite, etc.).
- Property damage: Umbrella insurance can help cover loss or damage you cause to another's property if the damage exceeds your underlying policy limits.
- Lawsuits: If you are involved in a lawsuit for slander, libel, defamation of character and/or other personal attacks, umbrella insurance can provide coverage for legal expenses.
- Landlord liability: If you own a rental unit, umbrella insurance can help cover liability claims you may experience as a landlord, such as if a tenant trips on the property, gets injured and sues. If your landlord policy reaches it's limit, umbrella insurance can provide additional coverage.
Buying an umbrella insurance policy
Before you can purchase an umbrella insurance policy, most insurers will require you to have around $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy, says the Insurance Information Institute (III).
If you buy your home and auto insurance from the same insurer, you'll typically get a discount of 10% to 15% on your annual premiums, and you may get an additional discount on the umbrella policy as well. You can offset at least some of the umbrella premium by taking larger deductibles on your auto and home insurance policies.
With a single insurer, your coverage is less likely to fall through the cracks if the requirements for the umbrella policy change. And if you're sued, you'll have one set of defense lawyers for the entire case. Otherwise, agents advise you to buy the umbrella policy from your auto insurer because most large lawsuits involve auto accidents.
If your current home or auto insurer won’t sell you an umbrella policy — because your dog's breed is classified as potentially dangerous — ask an independent agent who represents multiple insurers to help you find a "stand-alone" umbrella policy.
Should I purchase an umbrella insurance policy?
In some cases, it makes more sense to purchase an umbrella insurance policy, especially if you have a lot of assets or a high chance of being sued. Progressive advises individuals whose net worth exceeds their maximum liability coverage via their standard insurance policies to open an umbrella policy in order to avoid any negative financial repercussions.
Furthermore, according to the III, you should purchase an umbrella insurance policy if certain activities and lifestyle risks raise the likelihood of someone suing you, such as:
- Owning a swimming pool and having pool parties
- Renting out a property you own
- Having a dog or a teenage driver in the house
You should also consider opening an umbrella policy if you:
- Are a landlord
- Own property
- Have significant savings/assets
- Want protection for liability claims against you when traveling outside the U.S.
- Coach kids’ sports
- Often host parties in your home
- Take part in sports where you could easily injure others - hunting, skiing or surfing
- Are a public figure
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FAQs
To decide how much umbrella insurance coverage you need, add up the value of your property, savings and investment accounts. Then, take a look at the liability insurance you already have through your existing policies and buy enough umbrella insurance to make up the difference.
How do you figure out how much umbrella insurance you need? ›
What Should I Consider When Choosing a Personal Umbrella Policy?
- Estimate the total value of your assets. Your umbrella coverage amount should align with your net worth.
- Review your insurance policies. Look at the liability insurance amounts on your existing policies, such as your car insurance and home insurance.
Having this kind of lifestyle puts you at a higher risk than the average. The best umbrella insurance policy to get with this kind of lifestyle is one that offers at least $1 million of coverage. If you have a booming career or business, you can even get umbrella liability insurance with $2 million coverage.
How much is a $1000000 umbrella insurance policy? ›
A $1 million umbrella policy costs around $150 to $300 per year, with the cost increasing a small amount for every additional million. As with any insurance policy, your exact price will depend on individual risk factors, including the number of people in your household and how many cars and properties you own.
How much does a $5 million dollar commercial umbrella policy cost? ›
Umbrella insurance is not a standalone coverage, and therefore, it can only be purchased on top of a general liability, employer liability, or commercial auto insurance plan. On average, commercial umbrella insurance costs about $75 per month for each $1 million of additional coverage.
What is the typical coverage amount for an umbrella policy? ›
The cost of umbrella insurance will also vary based on how much coverage you purchase. Most insurers offer umbrella policies in the range of $1 to $5 million, but some offer limits of up to $10 million. On average, $1 million in umbrella coverage costs approximately $400 a year.
What are the disadvantages of the umbrella policy? ›
What are the disadvantages of the umbrella policy? While umbrella insurance offers extensive coverage, it doesn't cover personal injuries or property, business losses, and intentional or criminal acts.
How much is a $10 million dollar umbrella policy? ›
The reasonable cost for high limits of coverage makes excess liability coverage the best value in personal insurance. For umbrella policies up to $10 Million in coverage limits, annual premiums generally cost in the range of $220 to $225 per Million, depending on the client's particular underwriting profile.
Is an umbrella policy worth having? ›
But if you do need the coverage, it could save you $1 million or more and keep you from losing your home and investments. Not everyone needs umbrella insurance. But for those with significant assets or a high lawsuit risk, it can offer both financial protection and peace of mind.
Is state farm umbrella policy worth it? ›
State Farm's umbrella policies are a good choice for customers with a high net worth who want extra coverage for property damage, injuries, and possible lawsuits that could result from various types of incidents.
After spending years building up your retirement savings, the last thing you want is for an unexpected catastrophic accident to wipe it all out with one lawsuit. The umbrella liability policy is your key instrument for helping to protect your assets.
Will umbrella insurance cover a lawsuit? ›
Umbrella insurance covers defense costs, judgments and court costs in the event you're sued, and protects against liability related to non-bodily and bodily injuries.
Why is my umbrella policy so expensive? ›
The cost of an umbrella liability policy depends on how much coverage you purchase, the state where you live (insurance rates vary by state) and the risk that insuring you presents to the insurance company. The more homes or cars you own, and the more household members your policy must cover, the more it will cost.
How much should a $2 million dollar umbrella policy cost? ›
A $2 million umbrella policy costs around $225 to $375 per year, on average. Every policyholder's umbrella insurance premium will vary based on their personal risk factors, so individuals who own more cars or properties will be more expensive to insure, as will people who are particularly likely to be sued.
Can you have multiple umbrella policies? ›
Yes! Sometimes, it isn't cost effective to purchase an umbrella or excess policy for all the work you do. You may have a contract that requires a higher limit and we can absolutely write umbrella or excess coverage that would only apply to that particular contract.
Does umbrella insurance cover home business? ›
Losses related to the operation of your business or damage to your business property would generally not be covered by a personal umbrella policy. The exclusion applies even if the business is home-based.
How much is a $2 million umbrella policy? ›
A $2 million umbrella policy costs around $225 to $375 per year, on average. Every policyholder's umbrella insurance premium will vary based on their personal risk factors, so individuals who own more cars or properties will be more expensive to insure, as will people who are particularly likely to be sued.
