Do I Need A Personal Umbrella Liability Policy – Real-Life Examples

what is personal umbrella insurance

Personal Umbrella Insurance for additional liability protection

Who Needs A Personal Umbrella Policy?

Does everyone need a personal umbrella insurance policy?

A personal umbrella policy provides coverage is for both liability and defense costs.

Your primary insurance will pay the first portion of a claim and after those limits are exhausted the umbrella policy will kick in.

The minimum umbrella dollar amount is $1,000,000 and typically goes up in increments of $1,000,000.

Personal umbrella liability covers or extends beyond the limits of your auto and home insurance liability limits. All carriers require a minimum underlying limit on the auto insurance and home insurance before the umbrella policy would be activated.

Is A Personal Umbrella Policy Necessary?

why buy a personal umbrella policy

Why you want to consider buying a Personal Umbrella Policy

Do I make enough money to need a personal liability insurance policy?

Only if you're concerned about losing your life savings or potential future earnings. Your auto and home insurance liability limits are the most amount those individual policies will pay anything over and above that amount you will be personally liable for financially. 

Having a personal umbrella policy will give you the added financial protection if you're held financially responsible for amounts over and above your auto and home insurance liability limits.

Protecting you from financial ruin and/or court ordered garnishment until your debt is paid, which could be never ending.

How does personal Umbrella Insurance work?

An umbrella policy gives you coverage above and beyond what your homeowners/renters and/or auto can offer. When your other policies are maxed-out, the excess liability or umbrella policy will pay for medical and legal bills, lost wages, pain, and suffering, and even emotional distress.

Names and identifying details in claims examples have been changed to protect the privacy of individuals. This information is for educational purposes only and does not constitute legal advice or guarantee or imply a similar outcome. Underwriting criteria vary by state.

What Does A Personal Umbrella Policy Cover?

Doesn't my auto and home insurance liability protect me?

A personal umbrella policy will provide both liability and defense costs if you were held liable for claims against you or found negligent and legally and financially responsible. 

The umbrella policy will pay and provide coverage after your underlying coverage with your auto and home insurance liability limits have been exceeded. Typically the auto insurance liability limit will need to be 250,000 / 500,000 and home insurance liability limit of a minimum of $300,000 Before the umbrella policy would be activated.

Why should I buy an umbrella policy

Why Should I Have An Umbrella Policy?

Having a personal umbrella policy will protect you both financially and in the court of law to defend you if a suit is brought against you for liability claims. Umbrella policies are very affordable starting as low as $150 a year for $1,000,000 in coverage.

The added coverage can't potentially save you hundreds of thousands or $1,000,000 or more if you're found liable for damages to others or property of others.

How Much Does A Personal Umbrella Policy Cost?

Who has the cheapest umbrella policy

Average Cost of Personal Umbrella Policies

$1,000,0000 Personal Umbrella Policy Cost $150 - $300 per year

$3,000,0000 Personal Umbrella Policy Cost $300 - $700 per year

$5,000,0000 Personal Umbrella Policy Cost $500 - $1500 per year

The cost of an umbrella policy is determined by the risk associated with the underlying coverage. If you own multiple vehicles that have young drivers in the household or own multiple rental properties, the cost for an umbrella policy will be higher than an individual with one vehicle and one home with no young operators in the household.

Depending on what state you're living, credit may also be a factor, including any prior tickets or accidents.

If you carry higher than the minimum required auto home insurance liability limits you can also reduce the cost of your umbrella policy. For example, if you have an auto policy with 250,000 / 500,000 liability limits and you increase that to 500,000 combined single limits CCSL this will reduce your cost of the personal umbrella policy.

Is An Umbrella Liability Insurance Policy Worth It?

Cost of personal umbrella insurance

Is it worth the extra cost to buy an umbrella liability policy?

Yes, for the minimal amount of money required to own an umbrella policy, starting at as low as $150 per year. This gives you the added coverage of $1,000,000 of financial protection against lawsuits over and above your auto and home insurance policy limits.

Most people feel the minimal amount of cost is well worth the Peace of Mind not to have to worry about your financial nest egg being lost due to a liability claim.

Who Has The Cheapest Umbrella Liability Insurance?

how to find a low cost umbrella insurance policy

How to find the most affordable umbrella liability policies?

Most insurance companies offer a personal umbrella policy as a package with their auto and home insurance. If you are unable to get a personal umbrella policy from your current carrier our agency can always quote you as a stand-alone policy with

The best way to find the lowest price personal umbrella policy is to get quotes through local agents or working with an umbrella insurance broker to receive multiple quotes at one time.

Make sure you have the minimum underlying requirements of that insurance carrier so as not to have a gap in coverage. Talk to your insurance professional to discuss the auto and home insurance liability limits you must have before the umbrella policy would kick in.

Do Personal Umbrella Policies Have A Deductible?

Yes, some umbrella liability policies do have a deductible for the retained earnings requirement. Make sure to ask your insurance agent or broker if there is a deductible, but most liability insurance policies I have no deductible.

Once the underlying auto and home insurance liability limits have been reached, then the personal umbrella policy would pay for legal defense costs in settlement amounts up to the limit of the liability coverage on the umbrella policy.

How Do I Qualify For An Umbrella Policy?

simple way to buy personal umbrella insurance

Qualifying for a personal umbrella policy is simple. You must have in auto and property policy. Property policies may consist of a home insurance policy, a condominium policy or even a renters insurance policy.

Provide it you have a good driving history and credit score you can find premiums starting as low as $150 per year for $1,000,000 in coverage.

It's probably one of the least expensive forms of insurance protection that provides the highest amount of coverage to provide it you have the minimum auto and property insurance liability limits.

You will see a potential increase in cost on your auto insurance if your current liability limits are not high enough, but most people carry 300,000 in liability coverage for their home or property insurance already.

Standalone personal umbrella policy

You can also buy a standalone umbrella policy with another company, provided you have your auto and property insurance with the minimum underlying liability limits.  

You'll need to check with your current carrier as you may be able to get auto and umbrella and have the home insurance with another company, vise versa or all three policies with different insurance carriers.

Average Cost Of An Umbrella insurance Policy?

auto and home owners need an umbrella policy

The average cost of a personal umbrella liability policy depends on the amount of coverage you decide you need for financial protection. A simple $1,000,000 umbrella policy can cost between $150 and $300 per year.

You can buy umbrella policies ranging from 1,000,000 to over 100 million dollars and those costs can vary greatly depending on the type of risk and even your occupation like celebrities, politicians four simply public figures.

How Does An Umbrella Insurance Policy Work?

Personal liability umbrella

Personal umbrella policy's work after your auto and home insurance liability limits have been exhausted. The umbrella policy, then provides additional financial protection, including legal expenses to defend you in court.

This additional layer of insurance protection goes over and above your current auto and property insurance policy.

How Much Liability Umbrella Insurance Do I Need?

Cost of umbrella insurance policy

The amount of coverage with a personal umbrella policy will vary greatly depending upon your net worth and your potential earnings potential in the future.

An example might be a young Doctor who has substantial debt because of school loans, but has the potential of earning hundreds of thousands of dollars for the remainder of their career could be sued for future earnings.

Someone working at an entry-level job in their early 20s and potentially living at home with their parents has a much less likelihood of finding themselves liable for a $1,000,000 or more simply because of their current assets and potential earning potential. But, that's not to say you couldn’t be sued for future earnings   

Can I be Sued For More Than The Policy Limits Of An Umbrella Policy?

How much personal umbrella coverage do I need

Personal Umbrella Coverage Start at $1,000,000

Yes, you can be sued for any amount even for more than the coverage amount you have with your personal umbrella policy. But, by having the umbrella policy that will also provide legal defense will help minimize your potential financial exposure. The insurance company will vigorously defend you because they will also be on the hook to pay a substantial claim and will want to get the final settlement down as low as possible.

That's not to say a case could be brought against you for 3 or $4,000,000 and you have a $1,000,000 limit umbrella policy.  If in the end, it's found that you are liable for $3,000,000 and you have a $1,000,000 umbrella policy anything over and above that amount would still be your personal financial responsibility.

What Is An Excess Umbrella Policy?

Excess liability insurance

An excess umbrella policy is the same as a personal umbrella policy for individuals and families. Excess umbrella or excess liability policies are the same terms for a personal umbrella policy.  Excess or umbrella liability insurance can help you from legal and financial hardship if you are sued.  

Don't let a large insurance claim wipe out your ability to pay your bills.  Buy a personal umbrella policy today and have the peace of mind you are not going to lose everything you've worked for over the years.

How Do I Get A Personal Umbrella Quote?

Insurance Customer Service

Call 800-459-6060 or click below

Umbrella liability policies are simple to get quotes from. You can either ask your current insurance agent or broker for quotes or shop online.

Provide it you have the minimum of one vehicle in one property insurance policy, you can get a personal umbrella policy set up the same day.

You may need to make some adjustments to your auto and home auto insurance liability limits so there's no gap in coverage.

A gap in liability coverage would be anything between your current liability limits and the minimum underlying liability limits on your auto insurance policy before the umbrella is activated.  Generally, you need to carry a minimum of 250,000 /500,000 liability limits. If you have lower limits than the ones just stated that would be the amount of the gap that you would be financially responsible for before the umbrella policy would kick in.

What Is A Business Umbrella Policy?

Umbrella policy for business

Excess liability or umbrella insurance policy for a business

A business umbrella policy provides protection that is over the general liability and commercial auto insurance policy. You can have a business umbrella policy, even if you do not have commercial auto insurance.

If you are doing business with other businesses, you may be asked to provide not only a general liability insurance policy, but excess or umbrella liability coverage over and above your basic general liability insurance amount.

An example might be a company has a 2,000,000 Dollar General liability policy and a $5,000,000 umbrella policy.  If the business is involved in a lawsuit and the judgment exceeds the two million Dollar General liability policy, then the umbrella policy would provide additional coverage for the business up to the policy limits.

Real-life Personal liability examples

Some people ask is an umbrella policy a waste of money

Let's look at some real-life examples and you decide.

Tragedy During Diploma Season: 1 Drunk Driving Death Every 50 Minutes

No graduation celebration is complete without relatives and friends. With alcohol in the mix, there's always the possibility of risky and irresponsible drunk driving. If an accident happens, it can be very serious and auto limits may be quickly exhausted. A personal umbrella policy may help.

A real-world story

After Aunt Kat celebrated her niece Olivia's graduation with a cozy dinner — and a few toasts — she drove back to the hotel with her other niece, Victoria.

Kat felt "just fine," having had only two glasses of wine. Yet as a small woman, she had a .079% Blood Alcohol Content and was impaired.

At an intersection, she failed to yield, colliding with a truck. All suffered critical injuries and a passenger in the truck was killed. After Kat's auto liability limits were exhausted for this at-fault accident, she was held responsible for all medical bills. But because she had a $2 MM personal umbrella, the policy satisfied the claim.

Claim: $2 MM

B4 U TXT: Drivers who are texting are 23% more likely to be involved in a car crash

Did you know most home and auto policies are capped at $500K, which sure sounds like enough in case of an accident. But what if the injured party needs medical help for the rest of their life? Protect your property and future wages with this essential policy.

A real-world story:

Ashley and Andrea would often carpool to their weekly dinner with friends from college. With her eyes on her phone instead of the road, Ashley didn't see the bicyclists in the crosswalk until it was too late.

Both cyclists sustained serious injuries, including head trauma, lung collapse, broken ribs, and multiple fractures. Andrea wasn't wearing her seat belt and suffered a severe head injury, requiring hospitalization and rehabilitation.

After Ashley's auto liability limits were exhausted, she was held personally responsible for all outstanding medical bills. Since she did not have any assets, her future earnings would be garnished until the bills were settled.

Claim: $625,000

Best in Snow: Critical Coverage for Hitting the Slopes

Skiing or snowboarding this season? We hope your time on the slopes will be safe, but if an accident happens, it can get pretty complicated and your insurance may fall short. See how a policy, you may never have heard of saved the (snow) day when things went downhill.

A real-world story

Carol, a software developer, was looking forward to spending her birthday vacation on the slopes with friends. An experienced snowboarder, she set out on her third run of the day just as Tiffany was skiing down the mountain too fast, forcing her to lose control and crash into Carol.

Carol suffered a complete ACL tear requiring reconstruction, a shoulder fracture, and a minor head injury, even though she was wearing a helmet — all of which prevented her from working for six months.

After Tiffany's homeowner's liability limit was exhausted, her standalone personal umbrella policy covered Carol's medical bills, loss of wages and pain and suffering.

Claim: $575,000

Borrower Beware: Your coverage may fall short

If you're borrowing a car, be sure to check your coverage. You may need this indispensable policy to help protect your assets and pay for medical and legal expenses, especially if you're driving someone else's vehicle, even if it belongs to a loved one.

A real-world story

Daniel forgot his brother’s flight was arriving, so he quickly hopped in his father-in-law’s car to pick him up in time for Thanksgiving dinner.

With the sun setting ahead of him, he didn’t see the teenagers crossing the street and couldn’t stop in time. The accident resulted in a fatality and caused multiple injuries to two others, who had extensive hospital stays and would both require lifelong care.

Daniel’s father-in-law’s underlying auto was exhausted first, followed by Daniel’s auto and then finally by Daniel’s personal umbrella policy, which responded to the multiple claims.

Claim: $4.3 MM

Be a Holiday Hero: The ultimate party should include this key coverage

Under social host liability laws, did you know party-givers can be held responsible when minors drink? Before your next celebration, check out this little-known policy that protects your assets like property and future wages and includes specialized legal defense when needed.

A real-world story

At his family's annual holiday party, Ian and his best childhood friends, Brendan and Tyler, all under age, decided to have some cocktails. No one noticed as they drank or as they left for a drive. When Brendan misjudged a bend in the road and slid into a street light at full speed, they all sustained serious injuries.

In addition to a hospital stay, their recovery would take months of physical and cognitive therapy.

After Ian's parent's auto liability limits were exhausted, their personal umbrella policy responded to cover their care.  The policy also covered defense costs for the family in ongoing litigation.

Claim: $825,000

Unlimited Mileage: Essential Coverage When Renting a Car

Spring break means you may be renting a car for your vacation — or one of your dependents might be. Driving in an unfamiliar area has a unique set of challenges, so be sure to protect yourself before hitting the road with a policy that extends coverage beyond just your home and auto.

A real-world story

Nathan was on spring break and rented a truck so he could meet up with his friends at Coachella. As he was driving through the desert, strong winds began to blow dust causing decreased visibility.

On the same highway, Roger, a recent retiree familiar with these conditions, slowed his car below the speed limit for safety. Nathan didn't see Roger until it was too late. Roger's car overturned and he ultimately succumbed to his injuries.

Since Nathan was a listed driver on his parents' policies, their personal umbrella policy covered Roger's medical expenses and ongoing litigation once their underlying auto was exhausted.

Claim: $875,000

The Risk of Teen Driving: Must-have Coverage for Youthful Operators

A car crash is the leading cause of death for teenagers and most happen in cars driven by another teen. Because your teen must be listed on your policies, you could be liable for any injuries resulting from an at-fault, covered auto claim. This policy can help protect your assets in case of an accident.

A real-world story

Emily, 17, decided to treat her best friend, Taylor, to a movie to celebrate finishing their finals. They were running late, so Emily sped down the highway and lost control going around a turn, crashing into a car with a family inside.

Taylor passed away at the hospital months later due to serious complications. The family suffered a loss of wages, emotional distress, and lengthy hospitalizations — and one child had a permanent disability and needed ongoing physical therapy.

Emily’s parents’ standalone personal umbrella policy covered the exorbitant medical bills of all the victims.

Claim: $3 MM

Minimum Coverage, Maximum Risk: The Trouble With State Minimums

Many drivers carry only state minimums for personal auto liability insurance with the best intentions, thinking that it's plenty. But when an accident happens, they soon find out how costly this choice really can be. Adding a personal umbrella policy with excess UM/UIM? Critical, not optional.

A real-world story

Ian, 36, a responsible bank teller, carried state minimums and when he accidentally struck Jackie, an aircraft mechanic on her bike, she suffered serious injuries that cost $650,000 to treat.

These medical bills quickly exhausted the coverage offered by Ian's policy, so she was forced to sue him, incurring legal fees paid out of her own pocket. Because Ian didn't have significant assets, he declared bankruptcy. Burdened by debt, unable to work and without compensation for lost wages, she too was forced to declare bankruptcy.

If Jackie had a personal umbrella with $1 MM excess UM/UIM, it would have kicked in after the underinsured motorist on her auto was exhausted to take care of lost wages and medical bills.

Nightmarish: Parents to Blame for Child's Misadventures

Accountability for a child’s actions falls with the parent. In the insurance and legal world, it's called “vicarious parental liability” and means that parents are on the hook for a kids’ antics. A personal umbrella policy adds a key layer of protection when other policies fall short.

A real-world story

Zack discovered leftover Fourth of July fireworks just in time for Halloween. He couldn’t wait to tell his best friend, Fletcher.

While their parents were soundly asleep on Halloween night, the pair snuck out and lit a bottle rocket. It zoomed off-course and landed underneath their neighbor’s car, which caught on fire in moments, followed by a tree and then their home.

Zack’s parents were responsible for his actions, even though they weren’t present and didn’t know what he was up to.

After their homeowner's liability limit was exhausted, their personal umbrella policy covered the rest of the damage.

Claim: $620,000

How umbrella insurance works

An umbrella policy gives you coverage above and beyond what your homeowners/renters and/or auto can offer. When your other policies are maxed-out, the excess liability or umbrella policy will pay for medical and legal bills, lost wages, pain, and suffering, and even emotional distress.

Names and identifying details in claims examples have been changed to protect the privacy of individuals. This information is for educational purposes only and does not constitute legal advice or guarantee or imply a similar outcome. Underwriting criteria vary by state.

About the Author

John Espenschied is a long-time veteran of the insurance industry. He has worked in various positions within the industry for over 20 years, and for the past 15 years, he has been the owner and operator of Insurance Brokers Group, an independent insurance agency. John loves advising people on the insurance that meets their needs and goals, whether it be for personal or commercial purposes.

John is married to Melissa, and they have three children together, as well as three grandchildren. In his spare time, John enjoys golfing and playing in the golf league, biking to their local brewery along the Missouri river, and going on motorcycle rides when the weather is nice.

John Espenschied

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