Umbrella Insurance: What It Is and How It Works (2024)

Umbrella insurance, or excess liability insurance, covers losses you’re responsible for after reaching your home or auto policy limits.

Christy Rakoczy
Written byChristy Rakoczy
Christy Rakoczy
Christy Rakoczy

Christy Rakoczy has been a personal finance and insurance writer for over a decade. Her work has been published on USA Today, MSN, Yahoo Finance, Credit Karma, Forbes Advisor, and more. Christy has a JD from UCLA School of Law and previously worked as a data analyst for Blue Cross and as a paralegal studies instructor before transitioning to writing full time.

Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

Featured in

media logomedia logo
Konstantin Halachev
Data reviewed byKonstantin Halachev
Headshot of Konstantin Halachev, VP of Engineering at Insurify
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.

Updated June 16, 2024

Why you can trust Insurify: Comparing accurate insurance quotes should never put you at risk of spam. We earn an agent commission only if you buy a policy based on our quotes. Our editorial team follows a rigorous set of editorial standards and operates independently from our insurance partners. Learn more.

Umbrella insurance is useful for people who have assets and savings that exceed a typical auto or home insurance policy limit. For example, the average net worth of U.S. households increased to more than $1 million in 2023.[1] But typical limits are $500,000 for home insurance and $300,000 for auto insurance.

Here’s how umbrella insurance can protect your assets and when you should get it.

What is umbrella insurance?

Umbrella insurance, also called excess liability insurance, covers losses you’re responsible for that exceed your policies’ liability limits. When a claim exhausts your underlying — or primary — insurance policies, umbrella insurance protects your assets by paying for additional legal fees or liabilities you owe.[2]

This type of coverage differs from other personal insurance policies because it’s a supplementary policy. Umbrella policies require an underlying insurance policy listed on the declarations page; you can’t purchase umbrella insurance as a stand-alone policy.[2]

Get Car Insurance Online

Full-coverage rates start at $42 per month

Secure. Free. Easy-to-use.
Based on 3,806+ reviews
4.8/5
Shopper Approved
ProgressiveLiberty MutualTravelers

How does an umbrella insurance policy work?

Umbrella insurance companies typically require you to have an underlying insurance policy before purchasing excess liability coverage. For example, you may need an auto, home, or watercraft insurance policy for the umbrella coverage to supplement.

Then, if someone makes a claim for injuries or property damage against your policy or sues you in excess of your primary policy’s limits, umbrella insurance can cover the excess. And your umbrella insurance only covers additional damages and liability up to its limits.

Umbrella policies usually have at least $1 million in coverage. And it’s often cheaper to purchase an umbrella policy than it would be to purchase $1 million in liability coverage for your home or auto insurance.[2]

FOR EXAMPLE

Say you have bodily injury liability car insurance coverage with a $300,000 limit and cause an accident that results in $1 million of medical bills for other people. Without umbrella insurance, you’re on the hook for the excess $700,000. With a $1 million limit for umbrella insurance, your auto insurance pays for $300,000 and umbrella insurance pays for the remaining $700,000, plus any legal fees your auto insurance doesn’t cover.

What does umbrella insurance cover?

Umbrella insurance pays for excess liability, like damages you owe to others. It doesn’t cover your own property damage or medical bills. Examples of what umbrella insurance would pay for include:[3]

  • Some liability claims your primary insurance won’t pay, such as defamation and libel claims

  • Additional damages exceeding the policy limits for injuries or property damage you cause

  • Legal fees your primary insurance doesn’t cover

Umbrella insurance pros and cons

Here are important advantages and disadvantages to consider before buying umbrella insurance.

Pros
  • Can be cheaper than increasing policy limits on underlying insurance

  • Doesn’t require a deductible

  • Can provide more asset protection than primary insurance

Cons
  • You still have to maintain underlying insurance coverage

  • Insurers usually only cover existing customers

  • Doesn’t cover damage to your property

Who needs umbrella insurance?

You need umbrella insurance if you have assets that exceed your primary policies’ limits. If someone brings a lawsuit against you with damages that exceed your policy limits, you’re responsible for paying excess costs out of pocket.

If your assets’ value doesn’t exceed your policy limits, you probably don’t need umbrella insurance.

You may also need umbrella insurance if your business or home puts you at a higher risk of claims. For example, homeowners with pools and landlords may want umbrella coverage to provide added protection.

Attractive Nuisance: What It Is and Why You Should Care

Attractive Nuisance: What It Is and Why You Should Care

Compare the Best Car Insurance Companies

Get personalized quotes from top 100+ auto insurers in minutes

Secure. Free. Easy-to-use.
Based on 3,806+ reviews
4.8/5
Shopper Approved
ProgressiveLiberty MutualTravelers

Where to buy umbrella insurance

Many insurance companies require you to have an existing insurance policy with them to purchase umbrella insurance. But some insurers may offer stand-alone umbrella policies.

You can usually purchase an umbrella policy online, but you may have to contact your insurance agent or company to modify your existing policies.

Here are some top car insurance companies that offer umbrella coverage.

State Farm: Best for defamation, libel, and slander coverage

Compare personalized, real-time quotes
IQ Score
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-five scale. The Insurify editorial team researches insurer data to determine the final scores.
4.6
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
842
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$54/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$117/mo

State Farm offers umbrella insurance with a minimum limit of $1 million and additional limits in $1 million increments. Its umbrella policies cover claims traditional policies may not cover, including defamation, libel, and slander claims. State Farm also has a network of more than 19,000 agents nationwide to provide in-person help for people who have questions when buying coverage.

Pros
  • High rates of customer satisfaction

  • Rideshare insurance available

Cons
  • No gap insurance offering

  • May not be the cheapest choice for drivers with violations

Read our State Farm review
Rosa - June 16, 2024
Verified

Not Happy

The individual agent was excellent, but as a whole, I'm not satisfied with State Farm. They didn't renew my policy just because I filed a claim. I wasn't given any explanation. I've always heard that State Farm cancels senior citizens.

Ruth - June 16, 2024
Verified

Not Happy At All

They turn a simple policy inclusion into a claim, which doesn't go away and causes the prices to increase.

John - June 16, 2024
Verified

Overpriced and Unresponsive Sales Team

I am disappointed.

American Family: Best for bundling policies

Compare personalized, real-time quotes
IQ Score
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-five scale. The Insurify editorial team researches insurer data to determine the final scores.
4.5
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
840
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$76/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$172/mo

American Family offers quotes online, or you can work with one of the insurer’s 1,700 agents to buy umbrella coverage. Coverage is customizable, and you can qualify for bundling and multi-policy discounts when you supplement your home or auto insurance with American Family’s umbrella insurance.

Pros
  • High rates of customer satisfaction

  • Numerous discount and coverage options

Cons
  • Only available in 18 states

  • Rates are merely moderate compared to other insurers

Read our American Family review
Christina - June 13, 2024
Verified

Good, Expensive

Good, Expensive

Christina - June 13, 2024
Verified

Good

Overall, it's good.

Farhad - June 12, 2024
Verified

Great Insurance

Sometimes, it's hard to get a hold of them and their website doesn't always run smoothly. Their lack of use of OEM is disappointing. Other than that, they are great.

Travelers: Best for international claims

Compare personalized, real-time quotes
IQ Score
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-five scale. The Insurify editorial team researches insurer data to determine the final scores.
4.5
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
829
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$89/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$195/mo

Travelers offers umbrella insurance policies with between $1 million and $10 million in coverage. Its policies pay for libel, slander, defamation, and invasion of privacy claims. It even covers liabilities outside of the U.S. Bundling discounts are available, and you can get help from one of Travelers’ 13,500 independent agents when buying coverage.

Pros
  • Accident forgiveness available

  • Robust coverage selections and discount offerings

Cons
  • Rideshare coverage only available in Colorado and Illinois

  • High number of negative customer reviews with the Better Business Bureau

Read our Travelers review
Kevin - June 15, 2024
Verified

Travelers Insurance Excellent Online Tools

The only issue was that the rate increased too much when new drivers were added.

Kevin - June 14, 2024
Verified

Looking for Another Company

It's not worth the money. My rate went up by almost $550 in less than a year.

Dorothy - June 6, 2024
Verified

Travelers Insurance

Travelers has been my insurance company for over 10 years and I am very satisfied.

Umbrella insurance FAQs

Here’s what you need to know about split-limit insurance. And check out the answers to common questions about umbrella insurance below.

  • Is an umbrella policy with insurance worth it?

    Yes. An umbrella policy is a relatively affordable way to buy additional liability protection for your auto or home insurance policies. Anyone with substantial assets to protect may find umbrella insurance is well worth purchasing to avoid excessive financial losses in a personal lawsuit.

  • Who needs umbrella insurance, and why is it important?

    Umbrella insurance is important for people with significant assets. If the value of your property exceeds the policy limits on your primary insurance, and you don’t want to pay excess damages and legal costs out of pocket, you should have umbrella insurance.

  • Can you add umbrella insurance to an existing policy or do you need a separate policy?

    Yes, you can add umbrella insurance to supplement an existing policy. In fact, many insurers require you to have existing policies with them.

  • Can you get umbrella insurance from a different company from your auto insurance?

    Not usually. Insurers typically require you to have primary insurance policies with them to buy an umbrella policy. Some exceptions exist, as a few insurers offer stand-alone policies for special circumstances or limits that exceed typical umbrella insurance limits.

Sources

  1. The Hill. "Here’s the average net worth of Americans by age."
  2. Mass Division of Insurance. "Personal Umbrella and Excess Liability Insurance."
  3. NAIC. "What’s an Umbrella Policy?."
Christy Rakoczy
Christy Rakoczy

Christy Rakoczy has been a personal finance and insurance writer for over a decade. Her work has been published on USA Today, MSN, Yahoo Finance, Credit Karma, Forbes Advisor, and more. Christy has a JD from UCLA School of Law and previously worked as a data analyst for Blue Cross and as a paralegal studies instructor before transitioning to writing full time.

Courtney Mikulski
Edited byCourtney MikulskiSenior Editor, Auto
Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

Featured in

media logomedia logo
Konstantin Halachev
Data reviewed byKonstantin HalachevVP of Engineering & Data Science
Headshot of Konstantin Halachev, VP of Engineering at Insurify
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.

Compare Car Insurance Quotes Instantly

Secure. Free. Easy-to-use.
Based on 3,806+ reviews
4.8/5
Shopper Approved
ProgressiveLiberty MutualTravelers

Latest Articles

View all