Umbrella insurance is extra liability coverage that kicks in when your auto or homeowners insurance runs out. If someone sues you for more than your policy covers, umbrella insurance pays the difference — up to $1 million or more.
How Umbrella Insurance Works
Say you cause a car accident and the other driver sues you for $800,000. Your auto policy covers $300,000. Without an umbrella policy, you pay the remaining $500,000 out of pocket. With a $1 million umbrella policy, it’s covered.
Umbrella insurance only kicks in after your underlying policy is exhausted. You must carry minimum liability limits on your auto and homeowners policies to qualify.
What Umbrella Insurance Covers
- Bodily injury liability (from car accidents, injuries on your property)
- Property damage you cause to others
- Personal liability (libel, slander, false arrest, landlord liability)
- Legal defense costs
What It Doesn’t Cover
- Your own injuries or property damage
- Business-related liability (you need a separate business policy)
- Intentional harm
- Criminal acts
How Much Does Umbrella Insurance Cost?
Typically $150–$300 per year for $1 million in coverage. A $2 million policy often runs $75–$150 more annually. It’s one of the cheapest forms of insurance relative to the coverage you get.
Who Should Get Umbrella Insurance?
You should consider umbrella insurance if you:
- Have significant assets to protect (home equity, investments, retirement savings)
- Own property that others use (a pool, trampoline, rental property)
- Have teenage drivers on your auto policy
- Coach sports, volunteer in leadership roles, or have a public profile
- Have a dog
As a rule of thumb: if your net worth exceeds the liability limits on your existing policies, an umbrella policy makes sense.
How to Get Umbrella Insurance
Most major insurers (State Farm, Allstate, GEICO, Liberty Mutual) offer umbrella policies. You’ll typically need to buy it from the same insurer that holds your auto or homeowners policy. Get quotes from two or three insurers and compare both price and coverage terms.