Personal umbrella insurance can be a valuable tool in your insurance portfolio since it protects your assets. Before you purchase this important protection, though, understand if you need it.
What is Personal Umbrella Insurance?
Your auto and homeowners or renters insurance policies cover your liability if you're in an auto accident or cause property damage. The liability coverage of these policies is limited, though.
Use your Personal Umbrella Insurance Policy to increase your liability coverage and protect your personal assets.
Personal umbrella policies are typically available in million-dollar increments, commonly from $1 million up to $5 million.
What a personal umbrella policy can cover
- Personal injury claims such as slander, libel or defamation of character
- Liability for vacation rentals and rented equipment like scooters, boats or jet skis
- Defense costs, including attorney and legal fees
- Incidents that occur while you are traveling internationally
How Does Personal Umbrella Insurance Work?
Imagine you cause an auto accident that injures another driver and damages property, and the injured driver sues for lost wages because they cannot work for several months. If the total liability judgment is $1 million and your auto policy limits are $500,000, you would be responsible for the remaining $500,000.
Without additional coverage you might need to tap financial accounts, sell assets, or face wage garnishment to satisfy the judgment. A personal umbrella policy can cover amounts above your underlying policy limits and protect your current assets and future earnings.
For more detail about liability coverage and common policy features, see Personal Umbrella Liability Insurance.
Do you Need Personal Umbrella Insurance?
You may think you don't have enough assets to warrant a personal umbrella policy, but many experts recommend coverage for anyone who earns a living and has potential exposure.
Guidelines to consider
- If assets exceed $1 million and income is $100,000 per year — consider at least $1 million in umbrella coverage
- If assets exceed $2 million and income is $200,000 per year — consider at least $2 million in umbrella coverage
- If you own rental property — consider $3 to $5 million in umbrella coverage
Where to Buy Personal Umbrella Insurance
If you are ready to purchase personal umbrella insurance, talk to an agent who can review your assets and recommend appropriate coverage for your needs, financial security, and peace of mind.
Frequently Asked Questions
How much umbrella coverage should I buy?
The right amount depends on your assets, income and exposure; common policies range from $1 million to $5 million and guidelines recommend matching coverage to your net worth and risks.
Does an umbrella policy cover the cost of legal defense?
Yes, most umbrella policies include defense costs, but coverage terms and whether defense is inside or outside the limit vary by policy.
Do I need underlying policy limits before an umbrella policy applies?
Typically yes; insurers usually require minimum underlying liability limits on auto and homeowners policies before the umbrella coverage kicks in.
Will an umbrella policy cover incidents that happen abroad?
Many umbrella policies extend coverage worldwide, but you should confirm territorial limits and exclusions with your insurer.