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Umbrella Insurance

Umbrella Insurance

what is umbrella insurance

The independent brokers at Compare A Quote can provide you with all kinds of insurance to protect your assets, including an umbrella policy. This is a secondary form of insurance requiring a primary policy that is the first payout on a claim before the umbrella coverage becomes effective. For example, a home insurance policy provides the direct liability of a loss. Once the amount of money in the homeowner’s liability is exhausted, the umbrella insurance kicks in to cover the remaining liability. It can protect you from the kind of financial devastation that sometimes arises if someone sues you for property damage, injury, and associated legal defense costs.

What Is Umbrella Insurance?

In the most straightforward definition, Umbrella insurance is a type of insurance used for any additional liability claim greater than your homeowner’s, or auto insurance can cover. If you own a boat or any watercraft, umbrella insurance will supplement the coverage where your policy leaves off. Umbrella insurance ever covers specific liability claims your base policy mat not, false imprisonment, slander, and libel. If you own a residential or commercial rental property, an umbrella insurance policy can provide the additional liability coverage your renter’s policy does not. Umbrella insurance is extra liability insurance coverage that goes beyond the limits of the insured’s home, auto, or watercraft insurance. It provides an additional layer of security to those at risk of being sued for damages to other people’s property or injuries caused to others in an accident.

Umbrella insurance is an inexpensive option for the kind of protection you can hardly afford not to have. It can cost as little as 20% of your current home, auto, or watercraft insurance for one to five million dollars’ worth of additional liability insurance.
How Does an Umbrella Policy Work?

Your umbrella policy is additional coverage to your homeowner's and auto policy and will only take effect if the homeowner's or the auto coverage is not enough. Here are a few examples: 


Parties are fun; your teenager’s party with you out of town in your house is not much fun. His friends find and drink alcohol at the party, and one of them gets arrested for driving under the influence getting back home. You are sued.


Your daughter is in school and gets into a fight with a classmate, punching and breaking the student’s nose. The parents sue you for medical bills and pain and suffering.


You are distracted and cause a 10-car pile-up, and your auto property damage coverage can not cover all of the damages and replacement costs for all ten vehicles. In addition, your liability coverage is not high enough to pay for their medical bills.


It is your turn to make the lunches for a school trip, and your sandwiches are not the best part of the trip. Your son develops food poisoning, and several students also develop food poisoning, and their parents sue you.


Your dog is friendly, but your neighbor and dog do not see eye to eye. The neighbor is taking their child to the park, and their car is directly in front of your house. You open the door to greet them, and the dog slips behind you and charges right to the young child, viciously attacking her. Although you are friendly, the child has medical bills and pain and suffering. Your homeowner’s policy may cover the first $250,000.00, but the damages exceed that amount, and the court awards a more significant amount.

The term umbrella is not just a catchy name; its roots go back to 1949 when the first policies were sold and became widespread in the 1960s; although coverage details had assorted changes over a few decades, the basis and principals of the coverage are the same.

As the examples show, umbrella insurance covers you as the policyholder and other family or household members. So if your teenager isn’t the most responsible driver, you can rest easy at night knowing you’re protected with an umbrella policy that will cover the injured parties’ medical bills if you or your kids are found at fault for a significant accident. Please take the time to understand how your policy defines a household member, so you’ll have the coverage you need.

Please note that even though umbrella insurance includes coverage exceeding the limits of your homeowners, auto insurance, and boat policies, it does not substitute for these policies.

The event doesn’t have to involve your property for the umbrella insurance to cover it. In addition, you’re also covered outside your home, in other states, and worldwide. Except for ownership of homes and cars owned under other countries’ laws. Please ask your agent and check your policy if this applies to you.

What does umbrella insurance cover?

Auto Insurance, homeowner’s insurance, business insurance, and watercraft insurance are necessary because it provides a base of security and protection. Umbrella insurance delivers coverage exceeding the limits of your other insurance policies. Homeowner’s coverage can get very expensive quickly by increasing the liability limits. Auto insurance with 1 million dollars of “Bodily Injury” (BI) can triple the cost of your policy. Unless you have a houseboat increasing the liability coverage on a watercraft is prohibitive. Plus, the simple fact is not all liability claims are covered.

Umbrella insurance is extending the coverage of your base insurance and only after the base insurance limits are exhausted has the coverages “kick in,” although generally provides liability coverage for:

Injuries to other persons

Property Damage

A limited and specific set of lawsuits

Personal liability situations

Let’s face facts, every time you invite someone into your home, you increase your liability. Every time you drive your auto, watercraft, or RV, you increase your liability. When you are liable to someone, your primary insurance policies pay up to their limits. Still, you or your umbrella policy will pay all additional settlement or judgment amounts (up to the limit of the umbrella policy).

Bodily injury liability will cover the cost of medical bills, liability claims caused by you.

A severe auto accident where you’re found at fault.

The harm caused to others and their property by your dog*

Your houseguest is injured in your home.

A person is hurt while playing in your yard.

Property damage liability covers the damages or loss of another person’s property.

Damage to vehicles and other property due to an auto accident, but only if you are at fault.

Owners of rental units are protected as a landlord.

Your sidewalk has a crack, fix it or risk being sued for someone claiming injuries.

It’s your tenant’s dog* but you can be held responsible for the damages.

Additional coverage is provided if you’re sued

Slander: Facebook, YouTube, Tictok are all ways to injury another party with your spoken words or statement.

Libel: Putting something in writing that harms or injures a person.

False arrest, detention, or imprisonment.

Malicious prosecution.

Shock/mental anguish.

Legal defense costs if you are involved with a lawsuit.
Defamation of character.

Invasion of privacy

Liabilities that happened outside the United States.

What is not covered by an umbrella policy?
Not all insurance products cover every possible event, and an umbrella policy is not different. Umbrella Insurance will not provide coverage for:

If you injure yourself in your own home or damage your property.

There is no insurance protection if you commit a criminal or deliberately cause damage to someone else.

Any liability you assume under a contract between you and another.

Personal belongings

Do You Need Umbrella Insurance?
Umbrella insurance is not just for the wealthy it can benefit almost anyone. Accidents do not affect just one income range of people, so why have your property unprotected. If you have an apartment, home, or condo, just one event can cause your financial ruin. An umbrella insurance policy can help prevent you from paying out of pocket for another person’s medical, legal bills, along with the cost of pain and suffering if you’re found responsible. For instance, you invite friends for the weekend with their companion while swimming in the pool or playing in the yard, one of them is injured if you are found liable, an umbrella is your best bet. Suppose you go off to purchase some additional beer and wine during the party and are found to be at fault for a car accident that injures another person. An umbrella insurance policy can help cover your costs in this situation if you have reached your policy’s limit. Umbrella insurance also extends to additional members of your household, your spouse, children, and other relatives who live in your home and who do not have auto or property insurance in their name. So, if your partner causes a car accident or your teen is involved in posting a libelous comment online, your umbrella insurance policy may also help protect them. Protection so you can sleep or just a fear factor is involved in buying umbrella insurance. In a world where lawsuits are commonplace, insurance companies will cover some of the burden, where anyone can sue you for anything without regard for your financial survival. Horror stories are splashing over the news, like advertising for your favorite breakfast cereal where juries award multimillion-dollar judgments to the victims. These are everyday people just like you who were seriously injured; you may have been at fault, but it was only an accident. Severe and permanent disability costs and individuals like you had to pay. Finding yourself in such a situation can be rare, but can you afford that risk? Fear-factor or sleep. Our agents will speak with you about your needs but as a general rule, add the following:

The total value of your assets, including checking and savings accounts,

Your retirement and college savings and investment accounts.

In addition, your home equity. If the above amount is greater than the limits of your auto or homeowner’s liability limits, then an umbrella is a good option. Our thinking behind this advice is to have enough coverage to protect your assets fully so you can’t lose them in a lawsuit. Although, this recommendation makes no sense because jury awards can easily exceed insurance policy limits. The real question you must ask yourself is, what is the risk of being sued? The answer; Everyone, so umbrella insurance makes perfect sense for everyone. It can be a small price to pay for the extra protection and peace of mind. Some are more likely to need an umbrella policy than others and not even know it. Are you engage in some activities with more significant risk than others, then you’re an even better candidate for an umbrella policy. Owning property, renting it out, employing household staff, having a trampoline or hot tub, do you have large parties or are you a well-known public figure. How about a simple thing like having a teenage driver, owning a dog, or a swimming pool. Basically, the more stuff you have, the more likely you will be sued, and the more firmly we ask you to consider purchasing umbrella insurance. But anyone who is risk-averse can sleep better knowing an umbrella policy protects them.
How Much Does Umbrella Insurance Cost?
Let’s start with a piece of good news the actual cost of an umbrella liability policy will depend on how much coverage you purchase, which state where you reside (insurance rates vary by state), and the level of risk that you present to the insurance company. The greater your assets, the cost to insure will increase. If you have a primary and a vacation home, multiply cars, and if you have a larger household unit your policy will cover, the more it will cost. But umbrella insurance is relatively cheap compared to other types of insurance at a cost per million. The Insurance Information Institute states most $1 million policies cost $150 to $300 per year. You can expect an increase of about $75 more per year per $1 million in coverage. Insurance companies’ umbrella liability policies start at $1 million in coverage, with $5 to $10 million increase limits available. These limits can be more significant with insurance company underwriting approval. Umbrella insurance is cheaper than the average policy for two main reasons; first, the coverage starts when the base auto, home, or other policy has met its limits. Second, you must carry a higher coverage limit for those same base policies. Most homeowner’s policies will have $100,000 in liability coverage, but to have an umbrella policy, you must increase those limits to $300,000 to $500,000. In addition, your auto policy will be required to have a minimum Bodily Injury (BI) limit of $250,000  For some homeowner’s and Auto policies, this increase from your State minimum to a greater amount can be substantial.
What is the difference between Commercial Umbrella and Personal Umbrella Insurance?
A commercial umbrella policy may be based on a Commercial General Liability (CGL) primary policy and allows for additional coverage secondary to your general liability policy. Compared to a personal umbrella policy with a broader set of coverages above the homeowner’s and auto insurance coverages.
Is Umbrella Insurance the same as excess liability insurance?
Umbrella insurance has a few of the same characters as excess liability insurance; both will allow for an increased amount of coverage after the base policy has met its limits. The primary and most significant difference is that excess liability is usually a “follow form” policy. Whatever the base policy provides, the excess policy will conform to the same coverages and underlying policy. Excess insurance is stacked on top of the primary policy and only used when the first policy has reached its limit. Umbrella Insurance provides more comprehensive coverage; it also is secondary to the auto, home, and boat coverage, but it covers particular risks as the primary policy. Your home, auto, and boat insurance do not cover slander, Libel, False arrest, detention, imprisonment, malicious prosecution, shock/mental anguish, legal defense costs, defamation of character, or invasion of privacy. Hence, the “umbrella” is a broader coverage policy. For those risks not covered in your primary policy, an umbrella will cover the gaps in coverage.
Purchasing Umbrella Insurance
Suppose you are convinced and find merit in providing the extra level of protection for you, your family, and your assets. In that case, the actual purchase of umbrella insurance is a simple process and does not take much work on your part. Most insurance would like or demand that an umbrella policy can only be provided to their current policyholders. Still, each state will have different guidelines, and because some states do not offer homeowners insurance, these rules are not enforced.
best umbrella insurance companies


Even the most cautious person with the finest intentions can end up responsible for a massive judgment from a personal liability lawsuit. While you’re doubtful about finding yourself in this situation, it’s still wise to protect yourself against such a devastating financial loss. Umbrella insurance can help you do that.

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