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Accidents happen. Someone can slip on ice on the walkway to your house and break several bones. You could rear-end the car in front of you on a rainy night. Your dog could bite the mail carrier.<\/p>\n
Your home or auto insurance can cover the costs of these accidents if you\u2019re on the hook for them. Sometimes, though, costs can exceed what your insurance will cover. Then you\u2019re at risk of having to pay out of pocket \u2013 that is, unless you have an umbrella policy.<\/p>\n
Learn more: <\/em>How does car insurance work? The basics explained<\/em>.<\/em><\/p>\n \u201cUmbrella coverage is the often-overlooked safety net that can protect you from financial disaster,\u201d said Jason Javaheri, co-founder and CEO of Los Angeles-based J&Y Law Firm, which represents injury victims. And the cost is relatively low for the protection it provides.<\/p>\n J.D. Power\u2019s Craig Martin said that according to the J.D. Power 2025 U.S. Homeowners Insurance Study, only 38% of customers with an annual income over $200,000 indicated they have an umbrella policy, while only 25% of those with incomes between $100,000 and $200,000 had an umbrella policy. The percentage dropped to 14% for those with incomes less than $100,000.<\/p>\n That\u2019s why it pays to understand what an umbrella policy is, how it works, what it covers, and how much coverage you might need.<\/p>\n Learn more: <\/em>Homeowners insurance: What it covers and how much you\u2019ll pay<\/em><\/p>\n An umbrella policy is a type of insurance that provides additional coverage if you exceed the liability limits on your home, auto, or other property insurance. It\u2019s meant to protect your assets if there is a large claim or judgment against you.<\/p>\n Standard homeowners and auto insurance policies typically provide liability coverage for costs such as medical bills and legal fees if you\u2019re responsible for causing property damage or injuries to others \u2013 but only up to certain limits. You could easily top those limits if, for example, you were sued for damages related to a multi-vehicle car accident with several injuries.<\/p>\n \u201cThat\u2019s where umbrella would come into place,\u201d said Kim Bowser, vice president of national product and experience development at Grange Insurance. \u201cYour auto or home insurance would typically cover the loss first. Umbrella kicks in as an extra layer on top of that coverage protection.\u201d<\/p>\n Umbrella policies are available in million-dollar increments, ranging from $1 million to $5 million (but potentially higher for high-net-worth individuals and families), explained Erika Tortorici, owner and principal of Optimum Insurance Solutions in Hamilton, Massachusetts.<\/p>\n To buy a policy, you must already have a certain amount of liability coverage through auto, home, or other property insurance. Insurers typically require a minimum of $300,000 in liability coverage on a homeowners policy and $250,000 per person\/$500,000 per accident of bodily injury liability coverage and $100,000 of property damage liability (written as 250\/500\/100) on an auto policy.<\/p>\n Those thresholds are high because umbrella insurance is meant to cover only large claims, said Jennifer Gambill, a Miami-based independent insurance broker with World Insurance Associates. For example, if you were sued because someone was injured on your property and had to pay $500,000, your home insurance would pay up to its $300,000 limit, then an umbrella policy would pay the remaining $200,000.<\/p>\n Learn more: <\/em>How much car insurance do I need? <\/em><\/p>\n Here\u2019s a look at the eligibility requirements for umbrella insurance. Some companies only require certain bodily injury limits for auto policies and don\u2019t note a property damage liability limit. Also, some insurers, like Chubb and GEICO, have two different limit options to choose from for your auto policy.<\/p>\n American Family<\/strong>: <\/strong>250\/500 bodily injury liability limits for auto insurance and $300,000 liability limit for home insurance<\/p>\n<\/li>\n Allstate<\/strong>: <\/strong>250\/500\/100 liability limits for auto policy and $300,000 for home policy<\/p>\n<\/li>\n Auto-Owners:<\/strong> $500,000 bodily injury limits per accident for auto policy and $300,000 for home policy<\/p>\n<\/li>\n Chubb:<\/strong> 250\/500\/100 or 300\/300\/100 for auto policy and $300,000 for home policy<\/p>\n<\/li>\n Erie<\/strong>: 250\/500\/100 auto policy and $300,000 home policy<\/p>\n<\/li>\n Farmers<\/strong>: 250\/500\/100 auto policy and $300,000 home policy<\/p>\n<\/li>\n GEICO<\/strong>: 250\/500\/100 or 300\/300\/100 for auto policy and $300,000 for home policy<\/p>\n<\/li>\n Mercury<\/strong>: 250\/500 bodily injury limits for auto policy and $300,000 for home policy<\/p>\n<\/li>\n USAA<\/strong>: 300\/500\/100 for auto policy and $300,000 for home policy<\/p>\n<\/li>\n<\/ul>\n An umbrella policy provides coverage for both your home and your automobiles. It can also be extended to cover recreational vehicles, boats and other watercraft, rental property and timeshares, and other members of your household, including children away at school, Gambill said.<\/p>\n An umbrella policy provides coverage for the following:<\/p>\n Injuries to others, including the cost of medical bills and liability claims<\/p>\n<\/li>\n Damage to other people\u2019s property<\/p>\n<\/li>\n Personal injury to others, including libel, slander, and defamation<\/p>\n<\/li>\n Your legal fees to defend yourself in a lawsuit<\/p>\n<\/li>\n<\/ul>\n Learn more: <\/em>What does homeowner insurance cover?<\/em><\/p>\n An umbrella policy covers your liability to others, not damages or injuries to you or your property. \u201cIf your dog were to bite you, the umbrella policy typically wouldn’t cover those medical costs you might incur,\u201d Bowser said.<\/p>\n It also does not provide coverage for the following:<\/p>\n Intentional injuries to others<\/p>\n<\/li>\n Illegal activities, including accidents and injuries related to drag racing<\/p>\n<\/li>\n Losses related to a business you run out of your home<\/p>\n<\/li>\n Legal costs related to something you agreed to in a contract<\/p>\n<\/li>\n<\/ul>\n Here are just a few examples of the types of claims that would be covered under an umbrella policy.<\/p>\n You accidentally hit someone while driving or cause a serious accident with multiple vehicles<\/p>\n<\/li>\n You post something defamatory about someone on social media and are sued<\/p>\n<\/li>\n Your children\u2019s friends are injured on your trampoline or pool<\/p>\n<\/li>\n Your dog seriously injures a delivery person<\/p>\n<\/li>\n<\/ul>\n Learn more: <\/em>What does homeownership not cover<\/em>?<\/em><\/p>\n The amount of umbrella coverage you need depends on what you want to protect. For a standard two-car household with one home, $1 million in umbrella coverage can be adequate, said Alaina Hixson, director of sales and operations at The Churchill Agency, an independent insurance agency near Nashville, Tennessee. \u201cThe more assets you have, the more protection you need,\u201d she said.<\/p>\n You also might need more protection if you are exposed to more risks \u2013 such as teen drivers in your household or a sport or hobby such as hunting that could result in others being injured. Your insurance agent can help you assess how much umbrella coverage you need.<\/p>\n Umbrella insurance policy limits start at $1 million, but what if you need more? Most umbrella insurance companies offer higher limits that increase by million-dollar increments. Here are some examples of what limits are offered.<\/p>\n Allstate:<\/strong> Up to $5 million<\/p>\n<\/li>\n Auto-Owners: <\/strong>Up to $5 million normally (may go higher with underwriting approval)<\/p>\n<\/li>\n Chubb: <\/strong>Up to $100 million<\/p>\n<\/li>\n Farmers:<\/strong> Up to $10 million<\/p>\n<\/li>\n Hanover: <\/strong>Up to $10 million (limits vary by state)<\/p>\n<\/li>\n Mercury: <\/strong>Up to $5 million (limits vary by state)<\/p>\n<\/li>\n Travelers<\/strong>: Up to $5 million<\/p>\n<\/li>\n USAA<\/strong>: Up to $5 million<\/p>\n<\/li>\n<\/ul>\n Learn more: <\/em>How much car insurance do I need?<\/em><\/p>\n Umbrella insurance is relatively inexpensive for the coverage you get, said Tortorici. For example, a household with one home and two drivers would typically pay $250 to $350 a year for a $1 million umbrella policy, she says.<\/p>\n Adding teen drivers to your coverage will drive up your rates, as will multiple properties, vehicles, and watercraft. Your location and claims history, as well as your driving record, will also affect the cost of umbrella insurance. However, you typically can get a multi-policy discount when bundling an umbrella policy with your existing home, auto, or other property insurance.<\/p>\n Learn more: <\/em>How much is homeowners insurance? A guide to lowering costs<\/em>.<\/em><\/p>\n There are plenty of benefits of owning an umbrella policy, but there are a few cons to consider.<\/p>\n Pros<\/strong><\/p>\n Expanded liability coverage <\/strong>to protect your assets if your underlying home or auto insurance liability coverage isn\u2019t enough to pay for large claims<\/p>\n<\/li>\n Relatively low cost<\/strong> for the coverage you get<\/p>\n<\/li>\n Wide range of coverage<\/strong> for liability claims<\/p>\n<\/li>\n Additional coverage <\/strong>for claims not typically covered by home and auto insurance, such as libel, slander, even false arrest<\/p>\n<\/li>\n Coverage for other household members<\/strong> in addition to coverage for the policyholder<\/p>\n<\/li>\n A single policy<\/strong> can cover a range of property, including a home, vehicles, and watercraft<\/p>\n<\/li>\n<\/ul>\n Cons<\/strong><\/p>\n High underlying liability limits<\/strong> on your home and auto insurance are required to purchase umbrella coverage<\/p>\n<\/li>\n Coverage is limited<\/strong> to injuries and damage to others and their property, not you or your property<\/p>\n<\/li>\n Additional cost<\/strong> of owning a supplemental insurance policy<\/p>\n<\/li>\n<\/ul>\n \u201cUmbrella insurance isn’t just for the wealthy,\u201d Javaheri said. \u201cIt is for anyone with something to protect.\u201d<\/p>\n You should consider an umbrella policy if any of the following applies to you:<\/p>\n You own a home and vehicles<\/p>\n<\/li>\n You own rental property<\/p>\n<\/li>\n You have a high net worth<\/p>\n<\/li>\n You have teen drivers<\/p>\n<\/li>\n You have a pool or trampoline<\/p>\n<\/li>\n You have an RV, boat, or other watercraft<\/p>\n<\/li>\n You have a dog<\/p>\n<\/li>\n You engage in high-risk activities that could injure someone else<\/p>\n<\/li>\n<\/ul>\n Learn more: Cheapest car insurance for teen drivers<\/p>\n To have umbrella insurance, you must have certain primary insurance protection in place. \u201cIf you don\u2019t own a car or home, you can\u2019t get an umbrella policy,\u201d Gambill explained.<\/p>\n For example, you probably don\u2019t need umbrella insurance if you are a renter who relies on public transportation. That said, you still should get renters insurance with the maximum amount of liability coverage available.<\/p>\n Learn more: <\/em>How an auto and renters insurance bundle can save you big<\/em><\/p>\n The best way to get an umbrella policy is through your existing auto or home insurance provider. In fact, if you want an umbrella policy to cover your home, vehicle, and other property, all policies have to be under the same insurance carrier, Hixson said. Plus, having multiple policies with one carrier usually allows you to score a discount on your premiums.<\/p>\n Rarely would it make sense to get an umbrella policy through a different insurance carrier than the one you have. A few circumstances, such as owning a hard-to-insure breed of dog or having a bad driving record, might force you to get an umbrella policy through a specialty carrier, Tortorici said.<\/p>\n You can\u2019t buy an umbrella policy unless you already have an auto or homeowners policy with a high level of liability coverage. You might have to switch insurers if your current provider of home or auto insurance doesn\u2019t offer umbrella coverage.<\/p>\n Plus, an umbrella policy is an additional insurance cost. \u201cYou\u2019re paying for the peace of mind,\u201d Tortorici said. \u201cHopefully, you don\u2019t use your umbrella.\u201d<\/p>\n Umbrella insurance can protect your assets if you accidentally injure someone or damage property and have to pay a large claim. Although most state laws prevent your home from being seized if you\u2019re sued, your other property, investments, and wages could be at risk if you don\u2019t have enough liability coverage through your existing home or auto insurance to pay claims. \u201cI\u2019ve seen [umbrella insurance] do amazing things to help people,\u201d Hixon said. \u201cI don\u2019t think you can be overprotected when it comes to liability in this country.\u201d<\/p>\n You usually have to buy umbrella insurance through the insurance company that provides your auto or home insurance. However, some insurance companies offer stand-alone umbrella policies, meaning you don\u2019t have an auto or homeowners policy with them.<\/p>\n\n
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