Advertiser Disclosure

At Insurify, our goal is to help customers compare insurance products and find the best policy for them. We strive to provide open, honest, and unbiased information about the insurance products and services we review. Our hard-working team of data analysts, insurance experts, insurance agents, editors and writers, has put in thousands of hours of research to create the content found on our site.

We do receive compensation when a sale or referral occurs from many of the insurance providers and marketing partners on our site. That may impact which products we display and where they appear on our site. But it does not influence our meticulously researched editorial content, what we write about, or any reviews or recommendations we may make. We do not guarantee favorable reviews or any coverage at all in exchange for compensation.

What Is Umbrella Insurance?

An umbrella insurance policy can provide extra liability protection.

Why you can trust Insurify: As an independent agent and insurance comparison website, Insurify makes money through commissions from insurance companies. However, our expert insurance writers and editors operate independently of our insurance partners. Learn more.

Umbrella insurance is liability protection that covers damages other insurance policies won’t.

Your umbrella policy kicks in once you’ve hit the limit on your existing auto or homeowners insurance. In some cases, it may also cover additional incident-related expenses — like libel, defamation, or slander — that other policies don’t protect against.

How umbrella insurance works

Think of umbrella insurance like an extra layer of liability homeowners coverage — one that goes beyond the capabilities of your existing policies and provides you with greater asset and wealth protection.[1]

If someone were to get hurt on your property and sue you, and the damages and legal fees surpassed the limits on your homeowners policy, umbrella insurance would step in and cover the remaining costs. This could protect you from larger expenses that may otherwise force you to sell your home, cash in your retirement, or lose your financial savings.

What umbrella insurance covers

Let’s say someone is hurt on your property or their belongings are damaged or stolen from your home.

In these cases, umbrella insurance would cover things like:[2]

  • Legal defense costs

  • Attorney fees

  • Medical bills for those who sustain injuries on your property

  • Damages to others’ property or vehicles while at your home

  • Any court judgments or settlements for damages (this could include coverage for claims of libel, slander, defamation of character, and invasion of privacy)

What umbrella insurance doesn’t cover

Umbrella insurance won’t cover personal property damage (your own items), nor will it cover business losses. You’ll need a commercial policy for that. It also won’t cover contractual lawsuits or damage due to criminal activity or intentionally harmful behavior.

Learn More: A Guide to How Homeowners Insurance Works

Do you need umbrella insurance?

Umbrella insurance isn’t required, but it can be a smart coverage addition if you:

  • Own a swimming pool or trampoline

  • Rent out your property, either part-time or full-time

  • Have a dog

  • Regularly host guests, kids, or events at your home

  • Have significant assets (like investment accounts or real estate) to protect

If you were to be sued because of an accident, umbrella insurance ensures you’re not stuck paying any excess damages out of pocket — or worse, paying the damages by draining your retirement accounts, selling your home, or filing bankruptcy.

Compare Home Insurance Quotes Instantly

  • Personalized quotes in 5 minutes or less
  • No signup required

How much does umbrella insurance cost?

The exact cost of umbrella insurance depends on your coverage amount and individual risk factors, like where your home is located, its features, ages of those in your household, and more. The discounts you’re eligible for (like bundling your policy with another in your household) can also play a role.

On average, you can expect that $1 million in umbrella insurance coverage will cost you between $150 and $300 per year.

Factors that affect the cost of umbrella insurance

Any or all of the following factors can affect the rate you pay for umbrella insurance.

Coverage amount

You can generally purchase between $1 million and $5 million in umbrella insurance coverage. The higher the coverage amount you choose, the more your policy will cost, while lower coverage amounts have smaller premiums.

Existing policy limits

The limits of your auto and homeowners insurance policy also play a role. If your policy has lower limits, the umbrella insurance provider will need to pay out more if you’re sued. As a result, you’ll likely be charged a higher premium for coverage.

If your existing home insurance policy has higher limits, you may get a discount on your coverage, as there’s less of a chance your umbrella insurance will need to kick in and pay for damages.

Important Information

To calculate how much homeowners insurance you need, consider the cost to rebuild your home, the value of your personal items in your home, and the total of your combined assets. Then set your policy’s dwelling, personal property, and personal liability coverage limits accordingly.

The insurer

Insurance costs vary by provider — and often by quite a bit. Some insurance companies also offer discounts, which can help reduce your premium. Examples include autopay discounts, which reward you for setting up automatic payments, and bundling discounts, which give you a lower premium if you hold multiple policies with the same insurer.

Your risk level

Risks inherent to your property and its residents also factor into the rate you pay. If you own certain breeds of dogs, for example, that could increase your chance of getting sued and therefore mean a higher premium. Owning a pool or trampoline or regularly hosting parties or events may also increase your costs.

Some types of properties are riskier than others, like rental properties and vacation homes. If you own more than one property, you’ll generally pay a higher premium for umbrella coverage.[3] [4] [5]

Your credit

Your credit score can also play a role in your insurance costs. Insurance companies may consider people with lower credit scores as riskier to insure and may charge them higher premiums for coverage. People with higher credit scores usually pay less.

Your location

Since the cost of repairs, medical bills, and even litigation vary widely from one location to the next, so does the cost of insurance. You can typically expect higher premiums in more expensive locations. Lower-cost areas may come with lower-cost coverage.

Check Out: How to Buy Homeowners Insurance in 7 Easy Steps

How to save money on umbrella insurance

If you want the lowest-cost umbrella insurance policy, get quotes from several providers and take advantage of discounts where possible. This may include bundling a new umbrella policy with an existing policy from your provider. You can also work on improving your credit score or opt for a reduced coverage amount.

Where can you buy umbrella insurance?

Most major insurance companies offer umbrella insurance. You can also use an online comparison tool to compare umbrella policies from several providers at once.

Umbrella insurance FAQs

Umbrella insurance can be confusing. If you’re still not sure whether umbrella insurance is right for you, here are answers to some commonly asked questions about this type of coverage.

  • There’s no hard-and-fast rule, but a good guideline is to assess your individual risk of being sued, your existing insurance limits, and your unique financial situation. If facing litigation would drain your accounts or force you to sell your home, you may want an extra layer of protection in place.

  • To estimate your umbrella insurance needs, it’s generally recommended to calculate your net worth and purchase at least that much in umbrella coverage. So, for example, if your assets, investments, bank accounts, life insurance policy, and other holdings equal $2 million in total net worth, you’d likely want an umbrella insurance policy with at least $2 million in coverage. This would protect you from losing your assets in case of a lawsuit.

    You should also consider your future earning potential as well, as this can be affected by a lawsuit. Thus, a policy that exceeds the current value of your assets could help protect you from future income loss.

  • Yes. Umbrella insurance is a kind of liability insurance designed to cover lawsuits — as well as fees, settlements, judgments, and other associated costs. If you’re particularly at risk for a lawsuit, an umbrella policy can be a smart protection to have.

  • Commercial umbrella insurance is what you’ll need to cover excess liability costs for your business. For example, if a customer is hurt at your store or slandered by an employee, a commercial umbrella insurance policy would cover anything beyond your business insurance’s limits.

    Personal umbrella insurance, on the other hand, is for non-business-related litigation. This would be useful if someone is injured or has their car stolen at your personal residence, providing extra protection beyond what your existing policies have to offer.

Compare Home Insurance Quotes Instantly

  • Personalized quotes in 5 minutes or less
  • No signup required


  1. Insurance Information Institute. "Should I purchase an umbrella liability policy?." Accessed December 14, 2022
  2. Insurance Information Institute. "What is an umbrella liability policy?." Accessed December 14, 2022
  3. American Family Insurance. "What is Umbrella Insurance?." Accessed December 14, 2022
  4. Wise Insurance Group. "Umbrella Insurance Pricing Factors." Accessed December 14, 2022
  5. Trusted Choice. "Umbrella Insurance Cost." Accessed December 14, 2022
Aly J. Yale
Aly J. Yale

Aly J. Yale is a freelance writer and reporter covering real estate, mortgages, and personal finance. Her work has been published in Forbes, Business Insider, Money, CBS News, US News & World Report, and The Miami Herald. She has a bachelor’s degree in radio-TV-film and news-editorial journalism from the Bob Schieffer College of Communication at TCU and is a member of the National Association of Real Estate Editors.