What is Umbrella Insurance?
There are two types of umbrella insurance — commercial and personal — and both are considered supplementary to primary, or underlying, policies. Umbrella policies provide critical additional coverage that is often overlooked.
A commercial umbrella is designed to protect your business from liability risks related to its operation. It is purchased to add coverage to standard business policies.
A personal umbrella is designed to protect your personal assets from liability claims, particularly in scenarios where you may be held liable for damages. A personal umbrella is often purchased as a supplement to homeowners, auto, or renters insurance, because it can cover amounts above the limits on those standard policies. In the case of a lawsuit filed against you, umbrella insurance can pay for both legal fees and damages you are found responsible for, up to your policy limit.
Umbrella insurance can also fill in certain gaps in coverage.
Whether you need personal or commercial umbrella coverage, your local Trusted Choice® Independent Insurance Agent can analyze your complete liability picture — including the inherent geographical risks you face — and recommend an individualized insurance plan. Use the Trusted Choice independent agent matching tool to find a trustworthy, professional financial partner.
What Does Umbrella Insurance Cover?
An umbrella policy doesn’t cover your own property. It protects you financially from claims of damage to others’ property or bodily injury you’re legally responsible for.
For example, if you’re at fault in an auto accident or a neighbor is injured in your home, a liability claim could exhaust your underlying policy limits. That’s when umbrella insurance provides “excess liability coverage.”
It can also cover your legal fees and pay for a settlement if you’re sued for libel, slander, or defamation. Umbrella insurance can extend to other members of your household as well.
So, Umbrella Insurance Covers Lawsuits?
Yes. Its primary purpose is to protect you from liability claims — both those that result in legal action and those that don’t. It covers legal fees and required settlements up to your policy’s limit.
For many people, the potential of being sued is the main reason they purchase umbrella insurance.
What If I Don’t Have Umbrella Insurance?
If you face a liability claim and your existing policies aren’t enough, your personal assets — house, car, investments, savings, retirement accounts, and even future income — may be at risk. Wages can be garnished to satisfy unpaid claims.
An umbrella policy is a cost-effective way to protect yourself from financial disaster caused by a simple accident or unexpected lawsuit.
How Does Umbrella Insurance Work?
Umbrella insurance kicks in only after your underlying policy (homeowners, renters, condo, or auto) reaches its maximum payout. It then covers the remaining amount up to your umbrella limit.
Some umbrella policies also cover claims excluded from your primary insurance. In that case, you’ll pay a deductible known as “self-insured retention,” and then your umbrella coverage will apply.
How Much Does Umbrella Insurance Cost?
Umbrella insurance typically starts at $150–$300 annually for $1 million in coverage. You can often increase your coverage to $2 million with only a 50% premium increase.
Insurers may require you to meet minimum coverage limits on your underlying policies before allowing umbrella coverage. Your total insurance costs may rise — but so will your financial security.
If you’re unsure how much coverage you need, talk to a Trusted Choice agent.
How Much Umbrella Insurance Should I Carry?
Consider these three key factors:
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Liability risks: Hazards in your home, car usage, and risky hobbies.
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Asset value: Include your home, vehicles, investments, savings, and future earnings.
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Future income: Lawsuits can target future wages, so plan based on your potential earnings.
Even students or those early in their careers should consider umbrella coverage if they anticipate high future income or already hold significant debt. A lawsuit could undo all your hard work and investment in a promising future.
Protect your finances today and tomorrow. A quick conversation with your Trusted Choice Independent Insurance Agent can get you started.