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What is a Personal Umbrella Insurance and Why Do I Need It?




Many people get overwhelmed when they think about their insurance. If they own a home, they probably shopped around and went with the cheapest policy. Same with automobile insurance. However, that isn’t always the wisest move.

The truth is that many people are underinsured and it isn’t a good thing. They have a lot to lose if they ever find themselves in an automobile accident or if someone gets injured in their home or yard. For this reason, it is important to really know and understand your policy.

However, even the best policy might not be enough. For this reason, you may want to consider getting an umbrella policy. Here are some questions that you may want to consider if you are thinking about getting a better insurance policy, along with a personal umbrella insurance policy to further protect yourself.

What Is Umbrella Insurance?

When people think about personal umbrella insurance, they often think of it as extra insurance. It is meant to protect you and your assets from a liability claim.

That being said, umbrella insurance doesn’t take the place of your other insurance. In fact, it only comes into play when you reach your liability limits with your insurance policies, such as your homeowners or automobile.

You should think of it as an additional layer of coverage to your current policies. It doesn’t take the place of them.

What Does Umbrella Insurance Cover?

What Does Umbrella Insurance Cover
Insurance Agents hover over home, people, and car to visually show what umbrella insurance protects.

Bodily injury liability.

Bodily injury liability is the damage that occurs to someone else’s body. If you are at fault for the accident, you could be required to pay for their medical bills. They may also sue you for liability if they are injured and are unable to work or the accident was your fault.

These may include injuries that occur due to an automobile accident or even someone who gets hurt in your home or yard. If your dog bites a child, you may be held responsible. You may also get sued if someone falls off of the trampoline in your yard.

Property damage liability.

This covers the cost of damage or loss to another person’s tangible property. While most people think about an automobile that was in a car accident, you may also be held responsible for the fence that you hit in the accident. Anytime you harm or destroy another person’s property (even if it is an accident), you may be responsible for replacing it.

Landlord liability.

Landlords really need extra umbrella insurance to protect them. They can be sued for many reasons and the insurance will help to protect their investments. If anyone falls and hurts themselves on your property, you may be looking at a lawsuit. The same goes if someone gets bit by a dog that your tenant owns.

If you are a landlord, you really need to consider umbrella insurance so that you can protect your investment (and your business).

Libel or slander.

You could be sued over something that you said (or wrote) about someone.

Who Needs Personal Umbrella Insurance?

Personal umbrella insurance is designed to extend the coverage of your existing insurance policies. It can benefit any insurance holder who isn’t prepared to pay out of pocket if an accident exhausts the limits of a primary insurance policy like homeowners insurance or auto insurance. Property owners and individuals who drive can benefit from a personal umbrella insurance policy to extend liability coverage beyond your primary coverage. Personal umbrella insurance can provide coverage for injuries that occur on your property or in an accident you caused. It can also provide coverage for property that you damage in an accident. You may need personal umbrella insurance if the following situations apply to your lifestyle.

  • You’re a property owner
  • You frequently host parties in your home
  • You coach kids’ sports
  • Expenses related to a car accident would be a financial burden to you
  • You’re a landlord
  • You participate in sports that could injure others
  • You’re a public figure
  • Objects on your property could lead to injuries (like trampolines, guns, dogs, and swimming pools)

What Umbrella Insurance Won’t Cover

While personal umbrella insurance is designed to cover expenses after your primary policies are exhausted, it isn’t a full coverage provider for every expense related to a covered event. The purpose of umbrella insurance is to extend your personal liability coverage. For this reason, the following incidents aren’t covered by your personal umbrella insurance.

  • Your bodily injuries
  • Damage to your personal belongings (including your home, car, or possessions)
  • Business losses (You can purchase a commercial umbrella policy for this.)
  • Criminal activities
  • Intentional injury
  • Incidents not covered by your underlying policies

Personal property.

Though your umbrella insurance is supposed to help protect you, it doesn’t cover your own personal property. It does cover expenses that may happen to someone else’s property, which you may be held responsible for.

Business losses.

Unfortunately, personal umbrella policies don’t cover any losses that you may have in your business. This is even true if you run your business out of your own home. You may want to protect your business with a commercial umbrella policy to cover your commercial exposures.

While umbrella insurance isn’t designed to provide coverage for every emergency that arises, it’s a great way to avoid coverage gaps. Accidents are unpredictable, and your umbrella insurance policy could help you avoid financial burdens that arise when your primary insurance policies are exhausted.

Criminal or intentional actions.

If you are involved in criminal actions, your umbrella policy won’t help you.

Why do I need an Umbrella Insurance Policy?

Umbrella insurance is recommended for many reasons. If you qualify under any of the following, you may want to consider adding to your current insurance policy.

  • Own your own home
  • Have significant savings that you want to protect
  • Have a family that you need to take care of
  • Want to protect yourself against a potential loss of income
  • Are involved in dangerous activities
    • Own a pool or trampoline
    • Own certain breeds of dogs that are often considered dangerous
    • Hunt
    • Participate in sports where injuries often occur
    • Coach a sports team
  • Engage in activities where you may face a lawsuit.
    • Landlord
    • Business owner
    • Serve on the board of a nonprofit
    • Journalist or outspoken person

How does umbrella insurance work?

Umbrella insurance will be there for you if you need it. Let’s say that you were involved in a car accident. By the end of the whole process, you are going to be responsible for three hundred and fifty thousand dollars, both in bodily injury and personal property. Your automobile insurance has a liability of two hundred and fifty thousand dollars, yet you are still responsible for the entire amount. Your umbrella insurance will cover that additional one hundred thousand dollars so that you don’t have to pay that much out of your own pocket.

Just think about it for a moment. Could you really afford to pay hundreds of thousands of dollars if you were involved in an automobile accident?

What if someone got hurt in your home and broke his or her arm? Do you have enough money saved up to pay for the medical bills (over what your homeowner’s insurance will pay)? Do you want to drain your savings account in an instant?

Most people don’t, which is where an umbrella policy could really protect you and your family’s future. A good umbrella policy could bring you peace of mind, no matter what happens.

Top 5 FAQs About Personal Umbrella Insurance

Do I need umbrella insurance if I rent?

Umbrella insurance isn’t only designed to provide coverage on property you own. It can serve as an extension to your auto insurance policy that provides additional coverage for bodily injury or property damage in an accident you caused. If you have renter’s insurance, your umbrella insurance can kick in after your renter’s insurance limits are exhausted.

Will umbrella insurance cover a lawsuit?

Yes, in many situations when your primary coverage is exhausted, umbrella insurance will cover the costs of a lawsuit. It’s common for auto accidents or injuries on private property to result in a lawsuit for bodily injury, property damage, or personal injury. These types of lawsuits will be covered by personal umbrella coverage. Additionally, umbrella insurance can cover lawsuits that arise when you’re sued for slander, libel, false arrest or detention, malicious prosecution, or mental anguish.

Does umbrella insurance provide coverage for passengers?

Yes, in the event you caused an accident and passengers were injured, your umbrella insurance could pay for the costs of medical bills that exceed your auto insurance limits. This can also include coverage for lawsuits associated with passengers injured in the accident.

Can damages extend beyond the limits of my personal umbrella policy?

Yes, if you have a policy with a $1 million limit, lawsuits or damage costs could exceed beyond the policy’s limits. However, if you’re concerned you won’t have enough coverage, most personal umbrella policies include options to increase coverage incrementally up to $5 million.

Is personal umbrella insurance expensive?

No, in fact, umbrella insurance is known for having an excellent cost to coverage ratio. Generally, umbrella policies begin with a $1 million coverage limit at costs of less than $200 a year. Since you must have primary coverage before purchasing an umbrella insurance policy, you may also have an opportunity to take advantage of multi-policy discounts.

Pros and Cons of Personal Umbrella Insurance

A personal umbrella insurance policy can be considered an extension of your existing insurance policies. Since your primary insurance policy has limits to the amount of coverage applied to specific costs, your umbrella insurance can act as a fail-safe. However, your umbrella policy isn’t a complete insurance solution and can come with some drawbacks. If you’re still on the fence about whether you need personal umbrella insurance, consider these pros and cons.


  • Additional coverage when your primary coverage limits are exhausted can help you avoid financial distress.
  • Umbrella insurance is one policy that can extend your home or auto insurance.
  • Umbrella insurance goes into effect automatically when your primary coverage is exhausted.
  • Since you can’t prepare for unexpected accidents that occur on your property without fault, umbrella insurance can provide additional coverage for medical and legal fees.
  • Premiums are often low in comparison to the amount of coverage you get.
  • Umbrella insurance can provide coverage for legal costs of lawsuits even when you aren’t guilty.
  • It provides additional coverage for landlords in relation to the actions of their tenants.
  • Umbrella insurance can give you the confidence to purchase a pool or trampoline for your property, or to participate in active sports without worrying about the potential risks of a lawsuit.
  • Umbrella policies often have high coverage limits.


  • Umbrella insurance is not a stand-alone policy. You must already have homeowner’s insurance, auto insurance, or both.
  • Extended coverage may make you a target since judgments in lawsuits are often based on the maximum value of your insurance policy.
  • Deductibles are often higher for umbrella policies than primary insurance policies.
  • Umbrella insurance doesn’t cover home business losses.
  • You may need to raise the limits of your primary coverage policies to meet the minimum requirements for an umbrella policy.

Are you interested in Umbrella Insurance? Contact us today!

Whether you have good insurance or you are looking around for a better one, don’t hesitate to contact us. We would be glad to talk to you about multiple plans so that you can find the one that works best for you and your family. We will also be able to discuss umbrella plans with you. Together we can decide whether or not you need to add an umbrella plan to your current insurance policy.

Why us? We are dedicated to working with our clients by providing competitive insurance products and highly personalized service. We will help you find the right insurance for all of your needs, at a price that you can afford.

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