7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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Your standard homeowners policy offers financial protection in the event of damage to your dwelling, theft, or an accident on your property. But what if you need a bit more protection?
In that case, you might want umbrella insurance, which offers an additional layer of liability insurance that kicks in if damages exceed your homeowners coverage limits.[1]
Learn how umbrella insurance works, scenarios where umbrella insurance might come in handy, and how much you should expect to pay for this coverage.
Why consider umbrella insurance?
Liability limits in a standard homeowners insurance policy generally start around $100,000.[2] But if a serious injury occurs on your property and you’re held liable, you might face legal fees and financial obligations that are much higher than $100,000. If so, you might want to consider adding umbrella insurance to your homeowners insurance policy.
Homeowners with a higher chance of accidents occurring on their property are especially good candidates for umbrella insurance. Having a dog or a pool, or hosting regular large gatherings, increases the likelihood of injuries happening on your property.
Turning your home into a rental property can also come with a higher risk for liability damages. Purchasing excess liability insurance can give you peace of mind in this scenario.[3]
Most home insurance companies will require you to have high policy limits before you can qualify for umbrella insurance. Hitting $300,000 in homeowners insurance should be enough to be eligible for an extra layer of liability protection.
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How does umbrella insurance differ from home insurance?
Standard home insurance policies are known as “package policies” because they include a range of coverages which apply to your dwelling, your personal belongings, additional living expenses, and liability protection. Umbrella insurance is different because it only applies to personal liability situations. It won’t kick in to cover damage to your home.[1]
Any homeowner is eligible for homeowners insurance, and in most cases, your lender will require you to purchase homeowners insurance when you take out a mortgage on your home. But not all homeowners are eligible for umbrella insurance. You first need to hit certain coverage limits in order to qualify.
Umbrella insurance also won’t fill in the gaps in your existing homeowners insurance policy. For instance, if your homeowners insurance doesn’t cover damage from earthquakes or floods, you still won’t have coverage for damage from those events. Purchasing robust flood insurance from the National Flood Insurance Program can help fill in that gap.
How umbrella insurance works
Homeowners are eligible for umbrella insurance when they purchase liability limits that are typically around $300,000. Once you buy an umbrella insurance policy, you’ll have at least an additional $1 million in liability protection, depending on the insurance company you’re working with and the specific coverage package you choose.
The cost of umbrella insurance varies from company to company. Your home’s age, condition, and location might also affect how much it costs to add umbrella insurance. Generally, purchasing an umbrella policy can be cheaper than raising the liability coverage limits on your underlying policy.
For Example
Say you host a pool party that results in a serious injury to one of your guests. The injured party sues you, and you incur a judgment and legal fees of $700,000.
If you only had $300,000 in personal liability insurance on your homeowners policy, you’d be on the hook for $400,000. But with umbrella insurance, your $1 million in coverage would kick in to cover the extra $400,000 in expenses.
Key benefits of umbrella insurance
Purchasing a personal umbrella policy comes with some important benefits for homeowners, including:
Added financial protection: Legal defense costs can quickly reach hundreds of thousands of dollars, especially if the trial is prolonged. Umbrella insurance offers extra protection in these instances, lessening the chance of financial ruin after an unexpected accident in your home.
Worldwide coverage: In many cases, umbrella insurance covers you for incidents that happen around the world. Read your policy terms closely to confirm you have coverage worldwide.
Coverage for libel, slander, defamation, and invasion of privacy: If someone sues you for any of these things, umbrella insurance can kick in to cover your legal costs.
Other considerations for umbrella insurance
Umbrella insurance isn’t necessary for everyone. If you don’t have significant assets to protect, it might not make sense to take on the costs of umbrella coverage. If your home is relatively safe or you don’t rent out your property or host large gatherings there, you may not have a need for umbrella insurance.
Overall, it’s important to consider your financial situation before purchasing personal umbrella insurance. You might find that the chance of a lawsuit stemming from an accident on your property is so low that you can’t justify the cost of a policy.
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Scenarios where umbrella insurance may be useful
Umbrella insurance can come in handy in a variety of scenarios. Here are a few:
An accident on your property: You’re liable if a guest or renter gets hurt on your property. Umbrella insurance can help you handle the costs of any resulting legal action.
High liability auto accidents: If you cause a serious car accident that leads to expensiveliability claimsfor bodily injury and property damage, you may want umbrella insurance in addition to your standard auto policy.
Legal claims for personal actions: If you damage someone’s property and are found liable, umbrella insurance can cover the resulting judgments and legal fees.
Renters and vacation property risks: Anything can happen when you rent out your home. Landlords are often advised to purchase umbrella insurance to cover the costs if a tenant files a lawsuit.
Umbrella home insurance FAQs
Check out the additional information below about umbrella insurance.
What is umbrella home insurance, and how does it differ from standard home insurance?
Umbrella home insurance offers homeowners an extra layer of protection, covering them in the event of legal fees after a major accident on their property. Umbrella insurance differs from standard home insurance in two key ways: It doesn’t cover damage to your home, and you can buy it only if you already have a standard home policy.
What types of incidents or damages does umbrella home insurance cover?
Umbrella home insurance covers bodily injury and property damage liability claims. For instance, if someone gets hurt on your property and sues you, umbrella home insurance covers these costs if they exceed your standard policy limits. It can also cover other claims against you, such as lawsuits alleging libel, slander, and invasion of privacy.
How much additional coverage does umbrella home insurance provide?
The amount of coverage umbrella home insurance provides can vary from policy to policy. In general, umbrella home insurance offers at least $1 million in extra liability coverage.
How do you determine if you need umbrella home insurance?
Take inventory of your current assets and understand your net worth before buying umbrella home insurance. If you have many expensive assets to protect and can afford higher insurance costs, umbrella insurance could be a good idea. Umbrella coverage can also help if your property contains potential risks, like a pool or an aggressive pet.
What are the typical costs associated with umbrella home insurance?
Generally, homeowners pay around $200 per month for $1 million in umbrella insurance, though costs will vary based on the insurer you’re working with, the amount of coverage you’re purchasing, and specific information about your home, such as its age. Receiving an umbrella insurance quote can help you decide if it makes financial sense for you.
A.M. is a Brooklyn-based writer, editor, and content marketing strategist who's worked with major brands in insurance, tech, finance, and healthcare. He also contributes to The Average Joe, a personal finance newsletter that reaches over 250,000 daily readers. Since 2019, he's written for Insurify, breaking down a diverse range of insurance topics into crisp, readable prose.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
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