Home Car insurance Car Insurance types Umbrella insurance: What it is and how it works Umbrella insurance: What it is and how it works An umbrella policy covers damage caused by you, your dependents and even your pets. It starts paying out after your auto liability limits run out. View Carriers Please enter valid zip Compare top carriers in your area Written by Shivani Gite Shivani Gite Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions. | Reviewed by Nupur Gambhir Nupur Gambhir Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service. | Updated on: November 24, 2023 Why you can trust Insure.com Quality Verified At Insure.com, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry. High limits on car insurance and home insurance might not be enough to protect all of your assets. In that case, you may want umbrella insurance. Umbrella insurance kicks in when the limit of your auto or home insurance policy has been reached and there still are damages to pay. For example, if someone falls on your walkway and sues you for an amount of money that exceeds your policy’s coverage, your umbrella insurance will kick in. Key Takeaways An umbrella policy covers any damage caused by you, your dependents, or your pets. The Insurance Information Institute (III) says you can buy a $1 million umbrella policy for $150 to $300 a year. Umbrella policies don’t cover damages from businesses you own. You would need to purchase a business insurance policy for that. Before purchasing an umbrella policy, ask your insurer about the cost of increasing the liability limits in your current auto and home policies. What is umbrella insurance? Umbrella insurance is a type of personal liability insurance that provides additional coverage beyond the limits of your existing insurance policies, such as your homeowners or auto insurance. It is designed to protect you in case you are sued for damages that exceed the liability limits of your primary insurance policies. How does an umbrella policy work? An umbrella policy provides an extra cushion of insurance protection. An umbrella policy covers damage claims caused by you, your dependents, and even your pets. It starts paying out after your auto and homeowners liability limits run out. For example, if you have a home insurance policy with liability coverage of $300,000, the umbrella policy will pay claims above $300,000, up to the limit you select, such as $1 million. Or if your liability limit on your car insurance policy is $250,000 of bodily injury protection per person and $500,000 per accident, your umbrella coverage kicks in after you exhaust that coverage. Let’s say you caused severe injuries to one or more people in an auto accident, and the medical expenses add up to $400,000. If your auto insurance liability coverage tops at $250,000, you’re still on the hook for $150,000. Without umbrella insurance, your hard-earned assets are at risk. Instead, if you have an umbrella policy, it will pay the $150,000 for you. What does umbrella insurance cover? A personal liability umbrella policy guarantees you more than just higher liability limits. You’re paying for broader coverage in case you’re sued. It also covers you if you cause bodily injury, property damage or personal injury. Some policies also cover you if you face liability due to your service on the board of a civic, charitable or religious organization. Umbrella policies also covers attorney fees that may not be covered by your primary auto or homeowners policy. Coverage is generally provided if you are sued for the following: Slander Libel Defamation of character False arrest, detention or imprisonment Malicious prosecution Mental anguish Other personal liability situations QuickTake Do I need to purchase car insurance before I buy a new car? Do you need PIP or MedPay coverage? Understanding uninsured motorist property damage coverage Comprehensive vs. collision car insurance How to get insurance for your deductible Auto insurance for classic cars Off-road vehicle insurance Driving into Mexico? You'll need south-of-the-border car insurance See more > What doesn’t an umbrella insurance policy cover? As with any insurance policy, an umbrella policy won’t cover intentional acts that cause damage, nor will it pay for punitive damages in judgments against you or restitution you owe if you’re convicted of a crime. Umbrella policies also don’t cover damages from any businesses you own. You’d need a business insurance policy for that. It’s also important to note your own property is not covered by an umbrella policy. It is there to help cover expenses if you’re found responsible for damages to someone else. Check your umbrella policy for specific exclusions. Who needs umbrella auto insurance? An umbrella auto insurance policy can benefit various individuals in different situations. Here are some cases where you may need an umbrella auto insurance policy: High-net-worth individuals: If you have significant assets, such as a valuable home or investments, an umbrella policy can provide extra liability coverage that exceeds the limits of your standard auto insurance. Business owners: If you use your vehicle for business purposes or own a business, an umbrella policy can protect you from potential liability claims resulting from accidents or incidents involving your vehicle. Drivers with a history of accidents or violations: If you have a record of accidents, traffic violations, or DUI convictions, you may be considered high-risk and could benefit from the additional coverage provided by an umbrella auto insurance policy. Families: Families with multiple drivers or teenage drivers can benefit from an umbrella policy, as it can offer additional protection against accidents involving family members. How much umbrella insurance cost? Personal liability umbrellas are inexpensive because your primary auto or home policies pay most claims. According to the Insurance Information Institute (III), you can buy a $1 million umbrella policy for about $150 to $300 a year. The next million will cost about $75, and about $50 for every million after that. Typically, you can buy a personal umbrella policy of up to $5 million. Many insurance companies require that you purchase both your auto and homeowners insurance policy through them to buy an umbrella policy. Furthermore, your insurer may require you to buy auto or home liability limits at a minimum amount. According to III, most insurers will require you to have $250,000 per person and $500,000 per incident of liability insurance on your auto policy. For homeowners insurance, you’ll be required to have $300,000 of liability insurance before getting an umbrella liability policy for $1 million of additional coverage. Where can I buy umbrella insurance? Many insurance companies offer umbrella insurance as an add-on to your existing policies, such as auto or homeowners insurance. You can contact your current insurance provider to inquire about adding umbrella insurance to your coverage. Final thoughts on umbrella insurance coverage Before buying a personal liability umbrella insurance policy, ask your insurance company about the cost of raising the liability limits in your current auto and home policies. You may even consider offsetting the premium increase by raising your deductibles. At any rate, in our litigious society, it’s smart to protect your assets. If you have more than $500,000 in assets, umbrella insurance can protect you. Frequently asked questions Is umbrella auto insurance the same as excess liability insurance? Umbrella insurance, also known as excess liability coverage, provides additional coverage beyond the limits of your existing policies, such as home insurance and car insurance. It is designed to protect your assets in case you are responsible for damages or injuries that exceed the coverage limits of your primary policies. Is umbrella insurance a good idea? Yes, umbrella insurance is generally considered a good idea for individuals who want extra liability protection beyond what their standard insurance policies provide. It can help protect your assets and future income in a lawsuit. Umbrella insurance offers high coverage limits and can be a cost-effective way to increase your overall protection. Shivani GiteContributing Writer | . .Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions. In case you missed it Best Car Insurance Companies of 2024 Car insurance rates by state in 2024 What is full coverage car insurance? How much does car insurance cost for seniors in 2024? A complete guide to adding a teenager to your car insurance policy in 2024 What to do after a car accident that’s not your fault Total warfare: What to do when your auto insurer totals your car Car insurance claims: Who gets the claims check? 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Part 1: How insurance companies spot bogus claims Insurance options for rideshare drivers 10 things that are illegal but shouldn’t be 1/1 On this page What is umbrella insurance?How does an umbrella policy work?What does umbrella insurance cover?What doesn't an umbrella insurance policy cover?Who needs umbrella auto insurance?How much umbrella insurance cost?Where can I buy umbrella insurance?Final thoughts on umbrella insurance coverageFrequently asked questions ZIP Code Please enter valid ZIP See rates