What an umbrella policy is, and who should think about one
An umbrella is extra liability coverage on top of your auto and home policies, for the claim that's bigger than they'll pay. Here's who it's for.
Updated
An umbrella policy is extra liability insurance that sits on top of your auto and home or renters policies. If someone sues you over an accident and the claim is bigger than those policies will pay, the umbrella picks up where they stop.
It’s one of the least understood policies I sell, mostly because people think it’s only for the rich. It isn’t. Here’s what it does and who should at least have the conversation.
What it covers
Your auto policy and your home or renters policy each have a liability limit. That’s the most they’ll pay if you’re legally responsible for hurting someone or damaging their property. Above that limit, the bill is yours.
An umbrella adds another layer of liability coverage above those limits. According to the National Association of Insurance Commissioners, it can:
- Pay liability above your other policies’ limits when a covered claim is bigger than they’ll pay.
- Pay for your legal defense, which can be expensive even when you win.
- Cover some claims your other policies don’t, depending on the umbrella’s wording.
What it doesn’t cover
An umbrella is about harm to other people, not to you. It doesn’t pay to fix your own car or your own house. Those stay with your auto and home policies.
It also isn’t a business policy. If you run a business, the business usually needs its own liability coverage. Ask before assuming an umbrella reaches it.
Who should think about one
I don’t tell anyone they have to buy an umbrella. But I do bring it up when I see things like these:
- A teen or new driver in the house. One bad car accident can injure several people at once.
- A pool, trampoline or dog. Anything that makes an injury on your property more likely.
- People over a lot. Parties, sleepovers, a house everyone ends up at.
- A rental property, boat or golf cart. More things you own means more ways to be held responsible.
- Something to protect. Savings, investments or a good income. If a judgment is bigger than your insurance, the difference is yours to pay.
- A public life online. Some umbrellas cover claims like libel or slander that regular policies may not.
If none of that sounds like you, an umbrella may not be a priority. If several do, it’s worth a look.
How it fits with your other policies
An umbrella doesn’t stand alone. It needs your own auto and home or renters policies underneath it, and umbrella insurers usually require those policies to carry certain liability limits first. The exact requirements are set by the insurer, so I check them against your policies before anything else. I go through the layers in How an umbrella sits on top of your auto and home.
Florida · Switch to
In Florida
Florida’s required auto insurance is personal injury protection and property damage liability (Fla. Stat. 627.733 and 324.022). For most drivers, bodily injury liability, the part that pays when you injure someone else, isn’t required at all.
That matters for an umbrella. Umbrella insurers generally want bodily injury liability on your auto policy underneath. If you’ve been carrying only what the state requires, the first step is usually your auto policy, not the umbrella.
Illinois · Switch to
In Illinois
Illinois requires liability insurance on every car driven on public roads, at the minimums set in the Illinois Vehicle Code (625 ILCS 5/7-601 and 5/7-203). Those minimums are a legal floor, not a measure of what a serious accident can cost. An umbrella sits above whatever limits you choose, which is why I look at your auto limits first.
Good to know
- It’s liability only. Not your house, not your car, not your own injuries.
- It depends on what’s underneath. Keep the underlying limits your umbrella requires, or you could be left paying the difference.
- Read the exclusions. Every umbrella has its own list.
- Tell me when life changes. A new driver, a pool, a boat or a rental property is a good time to revisit this.
Want to talk it through?
Upload your auto and home declarations pages at /quote/, or send them to me. I’ll show you your liability limits today, explain what an umbrella would add on top, and let you decide. No pressure either way.
Questions people ask
What does an umbrella policy cover?
Liability, meaning injuries or damage you're legally responsible for causing to other people, and the cost of defending you, once your auto or home liability limits run out. Some umbrellas also cover claims your other policies exclude.
Does an umbrella cover damage to my own house or car?
No. An umbrella is liability coverage for harm to other people. Your own home and car are covered by your home and auto policies.
Do I need auto and home insurance to get an umbrella?
Yes. An umbrella sits on top of your own auto and home or renters policies, and umbrella insurers usually require certain liability limits on those first.
Is an umbrella only for wealthy people?
No. If a judgment is bigger than your insurance, the difference is yours to pay. It's worth thinking about whenever a serious lawsuit could cost more than your current policies would pay.