Personal Umbrella Insurance: Everything You Need to Know

Personal umbrella insurance is a type of insurance that provides additional liability coverage above and beyond the limits of your other insurance policies. It offers protection against lawsuits and claims that exceed the limits of your home, auto, or other personal insurance policies.

What Does Personal Umbrella Insurance Cover?

Personal umbrella insurance covers a wide range of risks, including:

  • Bodily injury liability
  • Property damage liability
  • Personal injury
  • Libel and slander
  • False arrest or imprisonment
  • Wrongful eviction
  • And more

Basically, personal umbrella insurance covers the gaps left by your other insurance policies when a claim exceeds their coverage limits. It’s like an extra layer of protection that shields your assets and future earnings from being wiped out by a single lawsuit.

How Does Personal Umbrella Insurance Work?

Personal umbrella insurance works by providing additional liability coverage above and beyond the limits of your other insurance policies. For example, if you have a home insurance policy with a liability limit of $300,000 and a personal umbrella insurance policy with a limit of $1 million, you have a total of $1.3 million in liability coverage.

If you’re sued for damages that exceed the limits of your home insurance policy, your personal umbrella insurance policy kicks in to cover the difference, up to its limit. For instance, if you’re sued for $500,000 and your home insurance policy has a limit of $300,000, your personal umbrella insurance policy will cover the remaining $200,000, assuming your limit is high enough.

It’s important to note that personal umbrella insurance only covers liability claims, not damage to your own property. For property damage, you’ll need to rely on your other insurance policies, such as home or auto insurance.

Do I Need Personal Umbrella Insurance?

If you have a lot of assets or a high net worth, personal umbrella insurance is a smart investment. It provides an extra layer of protection that shields your assets from being seized in a lawsuit. However, even if you don’t have a lot of assets, personal umbrella insurance can still be worth the cost if you’re concerned about being sued for a large amount.

Consider the following scenarios:

  • You cause a multi-car accident on the highway that results in several injuries and one death. The damages and lawsuits exceed the limits of your auto insurance policy, leaving you responsible for the rest. Without personal umbrella insurance, you could be on the hook for millions of dollars in damages.
  • An invited guest slips and falls on your deck, injuring themselves and requiring medical treatment. Your home insurance policy covers the costs up to its limit, but the guest sues you for additional damages, such as lost wages, pain and suffering, and more. Personal umbrella insurance can cover the difference and protect your assets from being seized.
  • You post a negative review online about a local business, accusing them of fraud and illegal activity. The business sues you for defamation, claiming that the accusations are untrue and damaging to their reputation. Your personal umbrella insurance policy can provide coverage for libel and slander claims.

How Much Personal Umbrella Insurance Do I Need?

The amount of personal umbrella insurance you need depends on your assets, income, and potential liability risks. Generally, it’s recommended that you have a personal umbrella insurance policy that covers at least your net worth, although some experts advise having coverage that’s two or three times your net worth.

The cost of personal umbrella insurance varies depending on your location, assets, and liability risks, but it’s generally affordable, averaging around $150 to $300 per year for $1 million in coverage.

FAQ

What Types of Claims Does Personal Umbrella Insurance Cover?

Personal umbrella insurance covers a wide range of claims, including bodily injury, property damage, personal injury, libel and slander, false arrest or imprisonment, wrongful eviction, and more. It covers the gaps left by your other insurance policies when a claim exceeds their coverage limits.

Does Personal Umbrella Insurance Cover Damage to My Own Property?

No, personal umbrella insurance only covers liability claims, not damage to your own property. For property damage, you’ll need to rely on your other insurance policies, such as home or auto insurance.

Do I Need Personal Umbrella Insurance if I Don’t Have a Lot of Assets?

Even if you don’t have a lot of assets, personal umbrella insurance can still be worth the cost if you’re concerned about being sued for a large amount. It provides an extra layer of protection that shields your assets from being seized in a lawsuit.

How Much Personal Umbrella Insurance Should I Get?

The amount of personal umbrella insurance you need depends on your assets, income, and potential liability risks. Generally, it’s recommended that you have a personal umbrella insurance policy that covers at least your net worth, although some experts advise having coverage that’s two or three times your net worth.

How Much Does Personal Umbrella Insurance Cost?

The cost of personal umbrella insurance varies depending on your location, assets, and liability risks, but it’s generally affordable, averaging around $150 to $300 per year for $1 million in coverage.

Can I Get Personal Umbrella Insurance Without Other Policies?

No, personal umbrella insurance is a supplemental policy that provides additional liability coverage above and beyond the limits of your other insurance policies. You’ll need to have other insurance policies, such as home or auto insurance, in order to qualify for personal umbrella insurance.

Conclusion

Personal umbrella insurance is a smart investment for anyone who wants an extra layer of protection against liability claims. It provides additional coverage above and beyond the limits of your other insurance policies, so you can rest easy knowing that your assets and future earnings are protected. If you’re concerned about being sued for a large amount, or if you have a lot of assets or a high net worth, personal umbrella insurance is definitely worth considering.