What umbrella insurance is
A personal umbrella policy is extra liability insurance that sits on top of your homeowners, renters, auto and watercraft policies. When a covered claim exceeds the limits of those underlying policies, the umbrella pays the rest, up to its own limit. According to the Insurance Information Institute (Triple-I), umbrella limits usually range from $1 million to $10 million, and an umbrella may also cover risks your other policies do not, such as libel or slander.
How it fits with your other policies
Insurers require you to keep minimum underlying coverage. Triple-I says the typical requirement is at least $250,000 of liability on your auto policy and $300,000 on your homeowners policy; exact amounts vary by insurer. If you let underlying limits drop below the required level, you may have to pay the gap yourself. When an umbrella covers a claim that the underlying policy does not, you usually pay a self-insured retention first, often a modest amount, before the umbrella responds. Most umbrella policies also pay legal defense costs, often in addition to the limit.
Who should consider it
Liability claims are not limited to wealthy households. A serious car accident, a guest injured at your pool, a dog bite or a social media post can lead to a judgment larger than standard policy limits, and a court can reach savings, home equity and future wages. Triple-I points to factors such as owning a swimming pool or trampoline, renting out property, owning a dog, having a teenage driver, coaching or volunteering, and having significant assets or a public profile.
What is excluded
Personal umbrellas generally exclude business and professional activities unless your underlying policies cover them, professional errors, intentional or criminal acts, injury to you or members of your household, damage to your own property, contractual liability and certain aircraft, large watercraft or vehicles. Board service for a nonprofit or company may require directors and officers coverage. Read the definitions of insured persons, covered vehicles and business pursuits carefully. Note the difference from a pure excess liability policy, which simply adds limits that follow the terms of the underlying policy, while an umbrella can be broader and drop down to cover some claims the underlying policy excludes.
What drives the price
Price depends on the limit you choose and the exposure you bring: the number of homes, rental units, vehicles and drivers, especially young drivers, plus boats, pools and claims history. Because an umbrella pays only after large underlying limits are exhausted, a high layer of protection is typically affordable compared with raising the limits of each underlying policy. Many insurers require you to buy the underlying home or auto policy from them too.
How to choose a limit
Add up your net worth, including home equity and retirement savings, and consider future earnings that could be garnished in some states. A common approach is a limit at least equal to your net worth, with more if your exposure is high. List every property, vehicle and boat you own so all of them are scheduled. Review the umbrella every year and whenever you buy a car, add a teen driver, buy a rental property or install a pool. Our umbrella insurance calculator helps estimate an appropriate limit.
How claims work
Report any incident that could lead to a large claim to both your underlying insurer and your umbrella insurer right away, even if you expect the underlying policy to handle it. Late notice can jeopardize coverage. The underlying insurer usually defends the claim first; the umbrella insurer joins when the claim threatens to exceed the underlying limit, and pays the excess up to its limit.
Polis Re helps you compare umbrella liability options alongside your home and auto coverage and request quotes in one place. Policies are issued by licensed insurers and placed through licensed producers in your state.
