We live in a society where lawsuits are becoming more commonplace. There’s a way to protect yourself. It’s called a personal umbrella policy. Do you need umbrella insurance?

You probably do if you:

  • own a home, have savings, or expect your income to increase
  • own a car or let someone else drive your car
  • host parties, especially if you serve alcohol
  • own rental property
  • have children away at college
  • assume responsibility for other people’s children via carpooling, babysitting, or sleepovers
  • own animals or care for others’ animals
  • use social media or allow your children to use social media
  • travel abroad
  • volunteer your time
  • own an all-terrain vehicle (ATV), boat motorcycle, golf cart, recreational vehicle (RV), snowmobile, or another specialty vehicle, especially if you allow others to ride or operate them.

Why do you need an umbrella policy?

Most people are unprepared for the consequences of a lawsuit. Verdicts and settlements are often in the millions. An umbrella policy adds an extra layer of protection over your homeowners and auto insurance policy.

Here are some examples:

You let your son borrow your car, and he is in a serious auto accident. The driver of the other vehicle is injured. Your son is found at fault and the injured driver sues you, the owner of the car. The suit is settled for $1 million that you are liable to pay. Your auto insurance has a $300,000 limit on bodily harm and property damage, so it will pay $300,000. How will you pay the additional $700,000?

Without a personal liability umbrella, you have to pay that $700,000 out of pocket. The money will have to come out of your retirement account, your main source of savings. The loss is devastating and means you’ll have to work 10 additional years, find a higher-paying job, or drastically cut back your expenses to replenish your savings and get back on track to be able to retire.

But if you have $1 million in umbrella insurance, your umbrella policy will cover the portion of the judgment that your auto insurance doesn’t, and your retirement savings will remain intact. The umbrella policy will also cover any attorney fees and other expenses related to the lawsuit that wasn’t covered by your auto policy. That coverage is in addition to the $1 million.

Another example is your teenager posts unflattering information about another person on social media. The other person files a cease and desist order and you, her parent, are sued for defamation and slander. The settlement is high, but you have peace of mind knowing you have an umbrella policy to pay for it.

What other actions does an umbrella policy cover?

  • liable
  • slander
  • false arrest
  • false imprisonment
  • wrongful eviction
  • privacy rights violation
  • wrongful detention
  • lawsuit

Your umbrella policy will pay your defense costs which will save you thousands of dollars in lawyer fees.

What actions are not covered by an umbrella policy?

Personal umbrella policies provide wide coverage, but they won’t likely cover the following:

  • Damage to your own property. Remember, it’s a liability policy, so it will only cover you if you’re held responsible for damage to someone else’s property. Make sure you have enough homeowners insurance to protect your own property and possessions.
  • Damage that you or a covered member of your household cause on purpose. If you deliberately pushed your party guest down the stairs, umbrella insurance wouldn’t cover the costs of the lawsuit or judgment (and neither would your homeowners insurance).
  • Liability incurred in business or professional activities. You’ll need business liability insurance to cover these incidents.
  • Liability you agreed to assume under a contract you signed.
  • Liability related to war or armed conflicts. Good luck finding any type of insurance that covers war-related damage; the financial losses associated with war are too high for insurance companies to cover.

How much does a typical umbrella policy cost?

Umbrella insurance is quite cheap compared to other types of insurance, especially considering how much coverage it provides. The Insurance Information Institute says most $1 million policies cost $150 to $300 per year.

Have questions about personal umbrella policy options that fit your individual financial and personal situation? Let’s Connect!

About the Authors

Connie Greenwood has 35 years of experience as an Insurance Advisor. She enjoys helping her clients and prospects understand their insurance options, and crafting insurance solutions tailored to their unique needs. Connie finds great joy in being a trusted advisor for her clients. She loves helping protect their financial welfare against unforeseen accidents and circumstances and bringing them peace of mind.



Tim Pingel has almost 20 years of experience as a personal insurance adviser. He provides individuals, couples, and families with home, auto, and umbrella insurance. His ultimate goal is to be his clients’ trusted adviser and expert, so they have the peace of mind and protection they deserve.