Umbrella Insurance: What It Covers and Why You Need It

Umbrella insurance gives you additional liability coverage beyond your main policy’s limits. It augments your existing home and auto insurance policies.^[1]

Most drivers and homeowners won’t need umbrella insurance for everyday accidents. Umbrella insurance protects your finances and assets from claims or lawsuits that are more expensive than your standard policy covers.^[2]

Here’s what you need to know about umbrella insurance, how it works, and who might need it.

How umbrella insurance works

Umbrella insurance is a type of liability insurance you add on to your standard home or car insurance policy. It only kicks in once you reach the liability limits of your main policy. It can also cover certain additional types of claims, like libel and slander. Excess liability coverage is similar to umbrella insurance, but it doesn’t expand what your policy covers.

For example, say your auto policy has a $50,000 property damage liability limit, but an accident you caused led to $75,000 in property damage. With umbrella insurance, your policy covers the remaining $25,000 not covered in your main policy.

Cost of umbrella insurance

Umbrella insurance costs between $13 and $83 per month, depending on the coverage limits you need. Your exact premium depends on several factors, including your location, the number of cars on your policy, and your net worth. Unique risk factors, like a swimming pool or a teen driver, also affect your rates.

The table below breaks down average costs for various amounts of umbrella insurance. Though umbrella insurance does come with extra fees, it may be worth it to avoid the costs of an expensive lawsuit or claim.

Coverage Limit	Average Annual Cost	Average Monthly Cost
$1 million	$150–$300	$13–$25
$2 million	$250–$400	$21–$38
$3 million	$600–$1,000	$50–$83

Disclaimer: Table data is based on real-time quotes from Insurify’s network of 500+ insurance partners. Actual rates may vary depending on the policyholder’s individual profile and coverage needs.

Compare Auto Insurance Quotes

Get rates from top insurers and save money today

Enter your ZIP codeView My Quotes

Excellent

4.7 out of 5 based on 14,312 reviews

Secure. Free. Easy-to-use.

Who needs umbrella insurance

While most people can benefit from umbrella insurance, drivers and homeowners with significant risk factors may want to purchase a policy to protect themselves.

Some scenarios when it may be wise to buy umbrella insurance include:

• You have significant home equity. If you would lose a significant amount of wealth if you lost your home in a judgment, umbrella insurance can provide added liability protection.

• You own a pool. Pools are hazardous and can open you up to injuries and liability claims. This is particularly true if you regularly host pool parties or guests at your pool. Umbrella insurance can help cover any related liability claims.

• You have a dog. Dogs can damage property and bite guests, leading to expensive liability claims. Umbrella insurance can help cover what your main policy doesn’t.

• You’re a landlord. Umbrella insurance can protect you from the additional liability that comes with having someone else living on a property you own.

• You have a teenage driver. Teenagers are the most at-risk age group for fatal car accidents, according to the National Highway Traffic Safety Administration. Umbrella insurance helps cover excess liability from serious accidents.

Certain careers may put you at a higher liability risk, too. Umbrella insurance may be a worthwhile investment if your job puts you at risk of injury or property damage lawsuits.

What umbrella insurance covers

Umbrella insurance is a type of liability insurance. It protects you from damage you cause to other people’s property and injuries related to your home or vehicle.

Umbrella insurance typically covers you and any other household members for the following:

• Bodily injury liability: Umbrella insurance covers injuries others sustain in an accident related to your home, vehicle, or dog.

• Property damage liability: Umbrella insurance would cover damages to others’ property at your home or in an at-fault car accident.

• Personal liability: Umbrella insurance covers slander, libel, false arrest or imprisonment, malicious prosecution, and mental anguish that you could be liable for.

• Legal costs: Umbrella insurance covers liability lawsuits against you, including attorney fees and court costs.

What umbrella insurance doesn’t cover

Umbrella insurance can offer protection beyond your main home and auto policies, but it doesn’t cover everything.

Umbrella insurance typically won’t cover:

• Your own injuries and property damage: Umbrella insurance covers property damage and injuries you cause to others, not your own.

• Criminal or intentional acts: Umbrella insurance won’t cover purposefully causing injuries or damaging property, or if you break the law while doing so.

• Business liabilities: You’ll need a separate liability policy for your business. It’s not covered by umbrella insurance.

• Contractual liabilities: Umbrella insurance won’t cover any liabilities you already acknowledged and agreed to in a contract.

Exclusions can vary by insurer, so be sure to check your policy for what it doesn’t cover.

Deciding how much coverage you need

You can typically choose between $1 million and $5 million of umbrella coverage. To determine how much to purchase, add up the value of your assets. This includes cars, boats, jewelry, and cash. Include any home equity, 401(k), IRA, retirement accounts, stocks, bonds, and investment accounts, too.

You should also consider your future earnings when calculating how much coverage you need, because they could be garnished in a legal settlement.

The total of these assets is about the amount you’d have at risk if you exceed your main insurance policy’s limits. You can then weigh this potential loss against your main policy’s coverage limits and determine what coverage might be necessary for comprehensive protection.

Ways to save on umbrella insurance

You have many ways to reduce your umbrella insurance premiums. Below are a few tips to lower your rates:

• Bundle your policies. You can often get a discount if you have more than one policy with your insurer.

• Increase the limits of your primary policy. If your main policy has higher coverage limits, your umbrella policy has to cover a smaller gap. This can reduce your costs.

• Leverage discounts. In addition to bundling discounts, you can also earn discounts for taking a defensive driving course, installing safety devices, good grades, and more.

• Shop around. Premiums can vary quite a bit by company. To find the best car insurance, compare quotes from a few different companies — both for your standard coverage and your umbrella insurance.

Here are the overall cheapest auto insurers, according to Insurify data.

The below national rates are estimated rates current as of: Monday, May 11 at 12:00 PM PDT. 

Data reviewed by Konstantin Halachev

Konstantin HalachevVP of Engineering & Data Science

• 7+ years experience in data analysis

• Ph.D. in Computational Biology

Konstantin has led data teams across multiple industries, including insurance, travel, and biology. He’s led Insurify’s engineering team for more than three years.

Insurance Company	Average Monthly Quote: Liability Only
Country Financial	$42
Auto-Owners	$45
USAA	$51
NJM	$53
State Farm	$53
Erie	$69
Allstate	$72
Mile Auto	$74
American Family	$80
GEICO	$80
Commonwealth Casualty	$81
Progressive	$84
Safeco	$84
The General	$85
National General	$87
Root	$91
Direct Auto	$91
Mercury	$91
Nationwide	$93
Dairyland	$94
Travelers	$96
GAINSCO	$97
Bristol West	$103
Farmers	$105
Elephant	$107
AssuranceAmerica	$112
Anchor	$113
Chubb	$116
Clearcover	$124
Plymouth Rock	$130
21st Century	$130
Liberty Mutual	$130
Shelter	$131
The Hartford	$138
CSAA	$143
State Auto	$148
Hugo	$188
Amica	$244

Disclaimer: Table data sourced from real-time quotes from Insurify's 500+ partner insurance providers and quote estimates from Quadrant Information Services. Actual quotes may vary based on the policy buyer's unique driver profile.

Find Affordable Car Insurance

Compare quotes and get the coverage you need at the best price

Enter your ZIP codeView My Quotes

Excellent

4.7 out of 5 based on 14,312 reviews

Secure. Free. Easy-to-use.

Real umbrella insurance examples

To understand how umbrella coverage works, let’s look at real-life examples of when coverage kicks in and how much protection it offers.

• 

  Example 1

  Your dog bites someone on your property, causing $300,000 in medical bills. Your current homeowners policy offers only $200,000 of liability coverage, leaving you to pay the remaining $100,000. Umbrella insurance would cover that gap for you.

• 

  Example 2

  You cause an accident that injures several people and damages multiple vehicles. The total damages amount to $250,000, but your standard policy limits are only $100,000. Umbrella insurance would cover the remaining $150,000 in damages.

Umbrella insurance vs. excess liability coverage

Both umbrella insurance and excess liability insurance provide additional liability coverage for drivers and homeowners. But while the two are similar, they’re not exactly the same.

Notable differences include:

• Coverages: Umbrella insurance offers additional coverages that your standard policies don’t cover — like libel and slander. Excess liability only extends the limits of your existing coverages.

• Cost: Excess liability may be more affordable than umbrella insurance because it doesn’t add coverages — only extends them.

• Flexibility: Umbrella insurance is often more flexible than excess liability. Umbrella insurance can augment coverage across multiple policies.

• Limits: Umbrella insurance typically offers higher limits than excess liability policies.

Umbrella insurance FAQs