What is umbrella insurance?
Umbrella insurance provides additional liability coverage, in $1 million increments up to $10 million, over liability coverage in other policies you already have and for unusual risks that aren’t covered by your other policies. It’s an affordable way to help you keep an extraordinary event from becoming a financial life-changer. Now that you know what it is, how does it work?
How does an umbrella insurance policy work?
An umbrella policy builds on the liability coverage of your existing car insurance, homeowners insurance, and renters, condo or boat insurance. If you cause injuries or damage to someone else and max out the liability limit in your existing policy, umbrella insurance can provide additional coverage, adding a layer of protection for your finances.
Umbrella insurance may also provide coverage where your existing liability policies don’t — for example, if you’re sued for slander over a social media post or you borrow a friend’s jet ski and are sued for injuries to a swimmer. And it follows you anywhere in the world.
How can umbrella insurance help?
These common situations are examples of the many ways umbrella insurance could help.
You broadside a car carrying two executives
Their car is totaled, they need medical care — and they sue you for lost wages while they recover, plus pain and suffering.
- Cost of accident, legal bills and settlement: $550,000
- Auto policy limit: $300,000
- Umbrella could pay: $250,000
Your injured guest needs ongoing care
A guest slips off your diving board and hits her head on stone pavers around your pool. She needs back surgery and ongoing rehab — and will be out of work for months.
- Medical costs, rehab and lost wages: $430,000
- Homeowners policy limit: $300,000
- Umbrella could pay: $130,000
You accidentally flood your downstairs neighbor
You leave your bathtub running and flood the condo downstairs, damaging walls, floors and furniture. Her home-based business shuts down while repairs are made.
- Cost of repairs, new belongings, lost income: $350,000
- Condo policy limit: $300,000
- Umbrella could pay: $50,000
What does umbrella insurance cover?
An umbrella policy typically covers costs related to:
- Bodily injury to others: medical bills, rehab, lost wages
- Property damage to others: Car, boat or home repairs, replacement of belongings
- Legal costs if you’re sued over injuries or damage you cause
- Lawsuits over defamation, libel, slander and invasion of privacy
- Damage or injury that occurs outside the U.S.
A standard Farmers® umbrella policy typically includes coverage for:
- Your primary residence
- Two motorized vehicles
- Small sailboats
- Motorboats (under 50 horsepower)
You can also add optional umbrella coverage for:
- Additional motorized vehicles
- Second or vacation homes
- Rental properties
- Unlicensed recreational vehicles
- Jet skis and jet sleds
- Vacant land
- Uninsured/underinsured motorist bodily injury (UMBI)
What is not covered by an umbrella policy?
Coverage in an umbrella policy varies, but some of the most important and common exclusions include:
- Your own injuries in a car accident, unless you have UMBI coverage on your umbrella
- Damage to your car, home or other personal property
- Damage caused because of a criminal or intentional action
- Any liability that you take on in a contract or waiver
- Your business activities (but separate umbrella insurance is available for businesses)
Who needs umbrella insurance?
Anyone with income or assets they want to protect — a home, a boat, investments, savings, rental properties — could benefit from umbrella insurance.
You may benefit if you:
- Host guests in your home
- Have substantial savings or investments
- Have a high income that could be garnished to pay damages
- Have a new driver in the house
- Travel out of the country frequently
- Have a pet
- Have a pool, coach a child’s team, post frequent reviews on social media or take part in other activities at higher risk of a lawsuit
How much is umbrella insurance?
Umbrella insurance can cost less than $1 a day for $1 million in coverage in many states. According to the Insurance Information Institute, “The first $1 million of coverage costs about $150 to $300 per year, the second million about $75, and subsequent increments of $1 million cost about $50 per year.” But your cost will depend on how much underlying insurance you have, where you live and the risk you represent.
Taking advantage of insurance discounts and bundling your insurance with one company are good ways to reduce your insurance costs. A Farmers agent can help you explore your options.
Related articles
What Is Umbrella Insurance and Why Should I Consider It?
An umbrella insurance policy can provide extra liability coverage over the limits provided by your home or auto policy. At Farmers, we offer from $1 million to $10 million in umbrella liability coverage.
Why Do I Need Auto and Home (or Renters) Insurance to Buy Umbrella Insurance?
Answer By definition, umbrella coverage is supplemental or “excess” liability coverage. In order to have this coverage, you need to have auto and home (or renters) coverage to begin with.
What is the Difference between Dwelling Coverage and Home Insurance?
Think of home insurance as a package of protection. Dwelling coverage is simply one part of that package. It covers the home itself —not the contents or land. Just the structure.
What Is a Business Umbrella Policy?
As you probably know, liability means your company’s legal responsibility for injury to others or damage to their property. Sources of liability include auto accidents, product defects and errors made by the company.
What Does an Umbrella Insurance Policy Cover?
Think of umbrella insurance as an extra layer of liability coverage on top of your existing home and auto insurance — a personal umbrella over you and your assets.
