What is an umbrella insurance policy?

Posted on Sat Jun 27, 2020

What is an umbrella policy? How much coverage do I need?

When you buy a house or a car or open a business, you may decide to purchase the minimum required insurance coverage. Such coverage may be sufficient after a minor fender-bender or if your roof is damaged by hail.

However, what if something catastrophic happens?

In such cases, basic liability coverage in your home and auto insurance policies may not cover the full amount of a large settlement or verdict. Suddenly, every asset you have could be at risk. A court’s decision could take away your current savings, a portion of your future wages and even your house itself.

When you have assets you can’t afford to lose, consider an umbrella liability policy. Umbrella insurance provides extra coverage over and above your existing liability limits and pays out once your main liability coverage has been exhausted.


Typically, you'll pay around $150 to $300 annually for $1 million in umbrella coverage, according to the Insurance Information Institute. While $1 million is the standard minimum for an umbrella policy, you also can opt for larger amounts of coverage in million-dollar increments. To be eligible for umbrella coverage, you’ll also need to meet minimum coverage requirements on your other policies – typically, $250,000 of auto liability coverage and $300,000 on your home insurance policy.

An umbrella policy can provide an extra layer of protection against the worst-case scenario for business owners, drivers, and homeowners.