Insurance 101
What Is an Umbrella Policy, and Do I Need One?
Short answer: An umbrella policy is extra liability insurance that sits on top of your home and auto policies. If you're sued or cause an accident and the damages are larger than your underlying policy limits, the umbrella can pay the difference, up to its own limit. It's commonly sold in increments of $1 million.
How it works
Say your auto policy has a certain liability limit and you cause a serious accident with injuries that exceed it. Without an umbrella, the amount above your limit could come from your savings, your home equity, or your future income. With an umbrella, the umbrella policy responds once your auto liability limit is used up.
Umbrella policies can also cover some liability situations your other policies may not, depending on the policy. Examples include certain claims of libel or slander. Every policy is different, so the specific wording matters.
What it doesn't cover
An umbrella is liability protection. It doesn't pay to repair your own car or home, and it doesn't replace your underlying policies. Insurers typically require you to carry certain minimum liability limits on your home and auto policies before they'll write an umbrella. Business activities usually need a commercial umbrella instead.
Who should consider one
An umbrella is worth a conversation if you:
- own a home or have significant savings, investments or retirement accounts
- have a teenage driver in the household
- own a pool, trampoline, dog, or rental property
- host gatherings, coach, or volunteer
- have a higher income that could be at risk in a lawsuit
- simply want more protection than your auto and home limits provide
For many families, an umbrella provides a large amount of additional protection for a relatively modest premium compared with the underlying policies. Cost depends on your situation, your household drivers and the carrier.
The bottom line
The real question isn't "do I need an umbrella?" but "what would happen to what I've built if I were sued for more than my policies cover?" If that answer makes you uneasy, let's talk it through.
This article is general information, not advice about your specific policy. Coverage depends on the policy issued and varies by state, carrier and underwriting.
Let's talk about your coverage
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Call or text 575-271-2727, email Jamie@