Is Umbrella Insurance Worth It? (Need To Know In 2024)

Do you own a lot of assets that fall outside of the coverage limits of your current insurance? Are you at high risk of getting sued? If you answered yes, consider purchasing umbrella insurance as an extra precaution. Umbrella insurance is designed to help prevent dire financial situations due to an event for which you’re responsible. Think about umbrella insurance as extra liability insurance that can protect you and your assets from major claims.

What is Umbrella Insurance?

Umbrella insurance is basically liability insurance to other policies you have, such as auto and home insurance. It typically provides coverage for things not included in your current policies. For example, homeowners insurance covers medical expenses for people who sustain an injury on your property, but umbrella insurance would pay for the property damage of others when you’re the one at fault. If you’re sued because of an event that happened in your home, car, or because you did something, you can rely on umbrella insurance for extra protection. You can also think of it as asset protection since it can protect you from having to pay for a lawsuit out of pocket.

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What Does Umbrella Insurance Cover?

Umbrella insurance offers a wide range of coverage. It can cover legal defense, medical bills, and other expenses if you hurt someone by accident. Coverage spans from events like big car accidents to guests who are injured in your home. Umbrella policies can usually cover you for events that your auto or home insurance can’t, such as being sued for defamation or libel, and more.

Here is a list of events umbrella insurance can cover:

Your dog bites someone
You accidentally injure someone
You drive your car into a building
You cause a serious auto accident
You cause a serious boating accident
Commercial or landlord liabilities
Personal injury
Property damages
Lost income to others
Legal costs
Slander or liable judgments

Umbrella insurance doesn’t cover damage to your own property or personal injuries.

Here is a list of events umbrella insurance doesn’t cover:

Business loans or losses
Criminal acts
Intentional acts or injury
Damage to your personal belongings
Damage due to war or terrorism
Damage due to nuclear radiation
Communicable disease
Liability associated with contracts you entered into

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How Much Does Umbrella Insurance Cost?

According to the Insurance Information Institute, an average umbrella insurance policy costs between $150 to $300 per year. Coverage limits start at $1 million and can go as high as $10 million. The average cost of umbrella insurance can also depend on what state you live in or how much coverage you require. Consider buying umbrella insurance only if your liability limits are less than the value of your assets. Consider all your assets before determining how much coverage you need. Most providers will sell an umbrella insurance policy on top of homeowners or auto insurance to raise the cap on your liability coverage. Say you cause a car accident resulting in severe injuries costing $300,000 in medical bills, but your car insurance policy limits your liability to $200,000. You can then use your umbrella insurance to cover the remaining $100,000. Overall, umbrella insurance helps you pay what you owe if you’re sued for damages that exceed the liability limits of your current insurance.

Your insurer will likely base your umbrella insurance policy rate on factors like where you live, your net worth, credit history, driving record, and your risk of filing an umbrella insurance claim.

Here are some of the top umbrella insurance providers of 2022:

Travelers – Best for Small Business Owners
Liberty Mutual – Best for Personal and Business Coverage
Allstate – Best for Recreational Vehicles/Watercraft
GEICO – Best for vacation rentals
Chubb – Best for luxury items
USAA – Best for members of the Armed Services
Geico – Best for bundled coverage

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Pros and Cons of Umbrella Insurance

Pros	Cons
Covers events that your main insurance might not cover	In most cases, you have to buy a minimum auto/property insurance liability coverage before adding umbrella coverage
Coverage limits start at $1 million	You usually need to carry property or auto insurance to qualify
Provides extra liability coverage once the limits of your home, auto, or other policies have been exhausted	Total premium costs may go up if you need extra liability coverage
Coverage usually applies to anywhere in the world	–
Usually provides coverage for certain rental items for which you don’t have insurance	–

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Who needs an umbrella insurance policy?

People who have a lot of assets purchase umbrella insurance most often. Consider buying umbrella insurance if you:

Own property
Have significant assets or savings
Own assets, such as guns, dogs, trampolines, or pools, that can lead to an injury lawsuit
Are a landlord
Frequently host parties in your home
Serve on the board of a nonprofit
Coaches of youth sports
Own a rental property
Post regular reviews of businesses and products
Participate in sports where you can injure others, such as skiing, surfing or hunting
Are a public figure
You’re responsible for others

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So, Is Umbrella Insurance Really Worth It?

It depends. If you have high-value assets or own an element that poses greater liability risks, then you should most definitely consider buying umbrella insurance. But if you don’t own a home, have little net worth, and don’t keep potentially dangerous equipment on your property, you can do without it. The main benefit of umbrella insurance is that it provides a little extra security and can help you secure future earnings. Since our current climate loves lawsuits, umbrella insurance is definitely a good option to consider. However, it makes little sense to get extra liability coverage if you haven’t maxed out your home or auto policy coverage.

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Frequently asked questions

Is umbrella insurance the same as excess liability insurance?

They’re two different policies. Excess liability insurance is an extra layer of coverage added to homeowners or auto insurance. It doesn’t cover some things that umbrella insurance does, like slander or libel lawsuits.

How do I qualify for an umbrella insurance policy?

You need an existing auto, renters, condo, or home insurance policy to qualify for an umbrella insurance policy. Providers usually offer umbrella insurance as an addition to your current coverage.