Umbrella Insurance: When To Cover Your Assets

Umbrella insurance is a type of personal liability insurance that can be indispensable when you find yourself liable for a claim larger than your homeowner's insurance or auto insurance will cover. It provides extra coverage beyond the limits of your existing policies, such as car or homeowners insurance. If you're at fault for injuries or damage and your other policies aren't enough to cover the costs, an umbrella policy helps pay what you owe.

Umbrella insurance is a good idea if your assets are valued at more than your current insurance policies' liability limits. For example, if you own a home, someone could sue you for more than your auto insurance policy's liability limit and threaten your home.

When your assets exceed the maximum liability coverage of your other insurance policies

If your assets exceed the maximum liability coverage of your other insurance policies, you should consider purchasing umbrella insurance. This type of insurance provides an additional layer of security to those who are at risk of being sued for damages to other people's property or injuries caused to others in an accident. It also protects against libel, vandalism, slander, and invasion of privacy.

Umbrella insurance is a cost-effective way to get significant extra liability coverage. It is typically much cheaper than other types of insurance, and it provides a lot of coverage. However, to get umbrella insurance, you usually need to have the maximum liability coverage available under your other insurance policies, such as homeowners and auto insurance. This can make the overall cost of insurance higher.

Umbrella insurance is particularly important if you have a lot of assets that you want to protect. If you are found liable for an incident that exceeds the coverage limits of your other insurance policies, umbrella insurance can help cover the additional costs. This can include legal fees and damages, which can quickly add up.

In addition, umbrella insurance can provide coverage for incidents that your main insurance might not, such as libel and slander. It can also cover incidents that happen outside of the US. This makes it a valuable option for those who travel frequently or have assets in other countries.

Overall, if your assets exceed the maximum liability coverage of your other insurance policies, umbrella insurance is a wise investment. It can provide peace of mind and protect your assets in the event of a lawsuit. By assessing your risks and choosing the right coverage amount, you can ensure that you have adequate protection.

When you want to protect your wealth in worst-case scenarios

If you want to protect your wealth in worst-case scenarios, umbrella insurance can be a good option. Umbrella insurance is a type of personal liability insurance that can cover claims exceeding the limits of your regular insurance policies, such as homeowners or auto insurance. It is designed to provide additional protection when your assets exceed the maximum liability coverage offered by your existing policies.

Umbrella insurance can be particularly useful in certain worst-case scenarios. For example, if you are at fault in a car accident that results in significant injuries to multiple people, and the bodily injury liability limit on your auto policy is insufficient to cover the total liability, an umbrella policy can help cover the excess amount. Similarly, if someone is injured on your property and the costs exceed the limit of your personal liability coverage, umbrella insurance can provide additional financial protection.

When considering umbrella insurance to protect your wealth, it is important to assess your level of risk and the value of your assets. If you have a high net worth or engage in activities that increase your risk of liability, such as owning a dog, a swimming pool, or rental properties, umbrella insurance can provide valuable protection. It is also important to note that umbrella insurance does not typically cover damage to your own property or intentional harm caused by the policyholder.

Umbrella insurance is relatively inexpensive compared to other types of insurance, and it can provide significant peace of mind by safeguarding your assets in worst-case scenarios. By purchasing umbrella insurance, you can ensure that your wealth is protected from unforeseen events and potential financial ruin.

When you want to cover incidents that happen abroad

Umbrella insurance is a type of personal liability insurance that covers claims in excess of regular homeowners, auto, or watercraft policy coverage. It covers injury to others or damage to their possessions. It is quite cheap compared to other types of insurance.

Umbrella insurance covers incidents that happen abroad. This is especially important if you are travelling with valuable assets, such as an ATV, RV, boat, or motorcycle.

Umbrella insurance can be critical if your other insurance policies do not offer enough liability coverage to protect your assets. It can be indispensable when you find yourself liable for a claim larger than your homeowner's insurance or auto insurance will cover.

For example, if you are in a car accident and are found to be at fault, your umbrella policy will not pay out until after the first $500,000 has been disbursed from your auto insurance policy. If you have $2 million in umbrella coverage, and the other party involved in the crash settles for $1.5 million in damages, the $1 million in excess liability above your auto policy threshold would typically then be covered under your umbrella insurance.

Umbrella insurance covers not just the policyholder, but also other members of their family or household. So if your teenager isn’t the best driver, you can sleep better at night knowing your umbrella policy will cover the injured parties’ medical bills if your kid is found liable for a major accident.

When you want to cover incidents involving your pets

If you own a dog, it's important to have liability insurance in case your dog bites someone. Dog bites are a major cause for concern among dog owners, and dog bite insurance is a necessity. While dog bite insurance doesn't exist as a specific type of insurance policy, damage caused by dog bites is typically covered under various types of common insurance policies, including homeowners insurance, renters insurance, and dog liability insurance.

The average cost per dog bite claim was more than $58,000 in 2023, and the average cost of a dog bite claim is about $49,000 as of 2021. These costs can be significant, so it's important to have enough insurance coverage to protect yourself financially. Umbrella insurance can provide extra liability coverage beyond what's included in your homeowners or renters insurance policy, filling any gaps in insurance coverage that can expose you to costly liabilities.

Umbrella insurance is a good idea if you want to cover incidents involving your pets, especially if you're worried about liability claims against you. It's also a relatively inexpensive way to get significant extra liability coverage, with a $1 million policy costing around $150 to $380 per year.

However, it's important to note that some umbrella insurance providers may not offer coverage for pet liability under their policies, and some may exclude specific dog breeds from coverage. Before purchasing umbrella insurance, carefully review the policy and ask an insurance agent whether coverage includes dog bites and your specific dog breed.

When you want to cover legal costs

Umbrella insurance is a type of personal liability insurance that can cover legal costs in excess of the limits of your regular insurance policy. It covers not just the policyholder but also other members of their family or household. It is relatively cheap compared to other types of insurance.

Umbrella insurance can cover legal costs in the following scenarios:

• Your dog bites someone.
• Your child accidentally damages someone else's property.
• You accidentally injure someone.
• You are sued for slander or libel.
• You are sued for false imprisonment.
• You are sued for wrongful entry or invasion of privacy.
• You are sued for malicious prosecution.

Umbrella insurance is particularly useful if you have a lot of assets or a high chance of being sued. For example, if you:

• Have significant savings or other assets.
• Own things that can lead to injury lawsuits, such as pools, trampolines, guns, or dogs.
• Have an inexperienced driver in your household.
• Regularly host parties in your home.
• Are a public figure.

The cost of umbrella insurance depends on how much coverage you purchase, where you live, and how many other insurance policies you have. It typically starts at around $200 per year for $1 million in coverage.

Frequently asked questions