The Basics of Personal Umbrella Policy: What You Need to Know

Umbrella insurance is a type of liability coverage that extends the coverage limits of your basic liability policies such as homeowners, auto, and watercraft insurance policies. In case you lose a liability lawsuit, it covers any amount above the limits of your standard policies and all legal costs related to the lawsuit. Therefore, it helps protect your assets and savings from creditors. Here’s a detailed look at what an umbrella policy covers.

How Umbrella Insurance Works

An umbrella insurance policy basically extends the coverage limits of your primary liability policies. For instance, if your auto liability insurance coverage limit is $200,000 and you cause a third-party injury worth $500,000 in a car accident, your umbrella insurance policy will cover the additional $300,000. Umbrella insurance can also cover situations and events excluded from your standard liability policies, including slander, false arrest, and libel. Additionally, in the event of a covered accident, your personal umbrella policy may cover members of your household, too. For example, if your teenage son (included in your auto insurance policy) causes a motor vehicle accident that injures a pedestrian, your umbrella insurance will likely cover the resulting liability costs that exceed the limit of your coverage. The scope of coverage generally varies from one insurer to another; therefore, you should talk to your insurance provider about this issue.

Do You Need Umbrella Insurance?

Umbrella insurance is only useful in situations where your primary liability insurance policies do not provide enough coverage. Therefore, depending on factors such as the limits of your underlying liability policies and your exposure to lawsuits, you may or may not need it. In general, you should carry this coverage if you:

  • Own high-risk properties such as swimming pools, trampolines, and bathtubs
  • Have an aggressive dog breed
  • Regularly receive visitors in your home
  • Are a prominent public figure
  • Have a high-risk driver such as a teenage driver in your household
  • Own multiple homes and automobiles

The Cost of Coverage

Insurers typically sell umbrella insurance policies in $1 million increments. The average annual cost of a $1 million policy ranges anywhere from $150 to $300. However, any coverage above $1 million may be cheaper. The cost of umbrella insurance largely depends on factors such as your profession, credit scores, and the amount of coverage required. For instance, if you are a public figure, say, the CEO of a multi-billion-dollar company, you will likely pay higher premiums on your umbrella insurance policy than someone working in an inconspicuous role.

Purchasing Umbrella Insurance

When it comes to purchasing umbrella insurance, you have several options. Firstly, you can purchase it as a standalone policy. This is the best option if you have high liability risk because adding it as an endorsement on your underlying policies may not provide adequate coverage. Secondly, you can bundle your umbrella insurance with home and auto policies for a potential bundling discount. Before purchasing a policy, be sure to review the terms and conditions stipulated because, while some insurers provide affordable policies, they have stringent terms that may be difficult to follow.


Common exclusions in umbrella insurance policies include:

  • Intentional damage
  • Damage to your property
  • Business liability
  • Liability resulting from conflicts or war

Umbrella insurance can help increase your liability coverage by filling the coverage gaps in your underlying liability policies. If you’re searching the internet for “umbrella insurance near me,” contact our experts at Spotlight Insurance Agency today. We can help review your existing policy and close any gaps with the right coverage.