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Umbrella insurance gives you additional coverage beyond your other insurance policies, such as homeowners insurance and auto insurance. If someone gets hurt on your property and sues you (for example), umbrella insurance can help protect your assets, such as your home and investment accounts, and can also cover legal costs beyond the limits set by your other insurance policies. Umbrella insurance can also help cover your legal fees and expenses if you are sued for libel or slander.
Here’s what you need to know about how umbrella insurance works and whether you need it.
A general insurance policy can help you cover your assets and pay legal fees and costs if you are sued for an amount in excess of your basic insurance coverages.
Homeowners insurance and auto insurance limit how much the policy will cover. You usually choose these limits when you buy your policy.
How car and home owner limits work
For auto insurance, limits are often written with slashes between the numbers, such as “50/100/25.” In this example, your liability coverage would pay up to $50,000 for bodily injury to a person, up to $100,000 for an accident, and up to $25,000 for property damage. With comprehensive auto insurance or collision coverage — both parts of full coverage auto insurance — the limit is usually the cash value of your car. Cash value is equal to what it would cost to replace your vehicle minus depreciation.
With homeowners insurance, you can usually find your limits by looking at your homeowner’s policy documents. In total, you will have six different types of coverage, one of which is personal liability coverage. This coverage has a limit that is separate from that for your home structure, other structures, and your personal property.
Umbrella insurance would help cover the costs, usually after you first pay the deductible on your homeowner’s, auto or other insurance policy and your costs reach that policy’s limit.
From there, a general insurance policy will cover the rest (up to the general policy limit). If you’re being sued for something that doesn’t involve your other insurance policies and you still want to use your umbrella policy, you may first have to pay a self-insured retainer, which works like a deductible for umbrella insurance policies.
If you’re looking for homeowners insurance or auto insurance, CNBC Select has listed some of the best on the market. Nationwide was our top pick for homeowners insurance overall because of its discounts and easy online access. Those looking for auto insurance might consider Geico, our top pick with affordable coverage and a good track record for customer service and financial strength.
National Home Owners Insurance
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price
The best way to estimate your costs is to request a quote
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Maximum coverage
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App available
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Highlights in politics
The policy covers home and property damage caused by theft, fire and weather damage. It also covers personal liability, loss of use and unauthorized transactions on your credit card
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It does not cover
Water damage, earthquakes, flood insurance, identity theft, high value items, home loss recovery (all of these can be purchased as add-ons for additional coverage)
See our methodology, conditions apply.
Geico auto insurance
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price
The best way to estimate your costs is to request a quote
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App available
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Highlights in politics
Geico coverage and services are available in all 50 states and the District of Columbia, and there are 16 different types of discounts. In addition to the standard coverage options, Geico offers a variety of optional add-ons such as emergency roadside assistance, rental car reimbursement and mechanical breakdown insurance.
See our methodology, conditions apply.
Umbrella insurance covers a variety of situations. In addition, the coverage also covers your family members in your household. Some common scenarios that insurance may cover include:
- Injuries to other people
- Damage to someone’s property
- Certain lawsuits, including landlord’s liability and false imprisonment
An umbrella insurance policy does not cover several notable things, including:
- Your injuries or damage to personal property
- Criminal acts or intentional damage
- Liability under contract
- Liability during business activity
If you own many assets, including property or savings, a blanket policy may be able to help protect them if you are sued.
There are several scenarios where you might consider a general insurance policy, including:
- Owning a pool or trampoline where people can get hurt
- Owning a pet
- As a landlord
- Work as a volunteer
- Having young or new drivers in your household
- Coaching children’s sports
- Participating in sports that may cause an accident to others
- He often organizes parties or has guests on your property
You may also need to have certain limits on your insurance policies before you can purchase umbrella insurance. Most insurers will want you to have $250,000 worth of liability coverage on auto insurance policies and $300,000 worth of liability coverage on your homeowner’s policy before they sell you a general insurance policy.
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Umbrella insurance typically costs about $200 in premiums per year for $1 million in coverage.
But the cost of umbrella insurance will vary depending on how much coverage you buy, where you live and how many other insurance policies are under the umbrella policy. Your risk factors can also affect the price.
Combining your policies, such as your homeowners and auto insurance, with your general insurance policy can help you get a discount.
Umbrella insurance can protect your assets and cover you outside of your homeowner’s or auto insurance policy if you or a member of your household is involved in a lawsuit. This can be a good option for those with a high net worth and those with additional risk factors.
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Editorial Note: The opinions, analysis, reviews, or recommendations expressed in this article are solely those of the editorial staff of Select and have not been reviewed, endorsed, or otherwise endorsed by any third party.