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What Is Umbrella Insurance?

What Is Umbrella Insurance?

Everyone should consider getting liability insurance, regardless of their circumstances. You might think you'll never be responsible for injury or property damage; however, the truth is that mistakes happen. Unfortunately, when accidents occur, no one is immune to liability.

If you want to cover yourself in case of a liability lawsuit, consider getting liability insurance. So, if something happens, you'll have insurance coverage to protect you and pay for your suit if you lose, meaning you'll have minimal out-of-pocket expenses.

However, there are instances where the amount owed is more significant than your policy's coverage limit. If that's the case, you'll have to pay the difference. With that in mind, it is best to have coverage, so umbrella insurance is essential. This article will discuss the necessary information regarding umbrella insurance.

What is Umbrella Insurance?

Umbrella or personal liability insurance will help protect you if you are party to a lawsuit and have damages larger than your coverage limit. An umbrella policy will help pay the difference, so you aren't paying the total entirely out of pocket.

Even if you already have homeowner's, auto, or boat insurance, it is still best to get umbrella insurance. Umbrella insurance works with your other plans; however, it can protect you in areas your other policies don't cover. In addition, umbrella insurance coverage provides additional liability coverage that car rental insurance does not cover. Also, umbrella insurance covers slander, libel, and false imprisonment claims, which other insurance policies do not cover.

One of the benefits of umbrella insurance is that it provides much broader coverage than other policies. For example, most policies cover specifically named incidents. In contrast, umbrella insurance covers everything except for specific exemptions listed in the policy.

Umbrella Insurance vs. Excess Liability Insurance

Although the two policies are similar, excess liability insurance is not the same as umbrella insurance. Both insurance policies extend your coverage limit; however, umbrella insurance provides additional protection that your other policies do not cover. In other words, umbrella insurance offers a broader range of coverage than excess liability insurance.

How Does Umbrella Insurance Work?

To better understand umbrella insurance and how it works, let's look at some examples where your base policies may not cover you while umbrella insurance would:

  • Your child gets into a fight and injures another child. The child's parents can file a lawsuit against you and your child.
  • You cause a car accident on the freeway, and eight other cars are involved in the accident. As a result, you exceed the coverage limits for car insurance's property damage and personal liability.
  • Your dog escapes your property and attacks a passerby, injuring them. The individual sues you to cover their medical bills, pain and suffering, and lost wages.
  • You make lunch for your daughter and her classmates for a school field trip. Unfortunately, you accidentally used expired lunch meat for the sandwiches. As a result, some classmates got food poisoning, so their parents sued you.
  • While you're out of town for the weekend, one of your teenage kids throws a house party. Unfortunately, a police officer pulls over a kid driving home drunk and arrests them for drinking and driving while underage. The kid's parents sue you.

Here is a detailed example:

You run a stop sign and hit another vehicle. The car is damaged, and several people are injured. The vehicle requires $20,000 for repairs, while the cost of injuries totals $250,000. In addition, the driver you hit was a surgeon. Unfortunately, they broke their arm, which prevented them from working until they fully recovered. They sue you for $150,000. The total costs, including a lost lawsuit, would be $420,000.

In this example, your primary insurance policy would likely not cover all the costs of the damages, including the other car, medical bills, and lawsuits. For instance, if your insurance policy only covered $200,000 for the incident, you would need to pay the remaining balance of $220,000. However, if you have umbrella insurance, the policy would cover the remaining balance, including legal fees for the lawsuit.

Do I Need Umbrella Insurance?

Unfortunately, getting sued is not uncommon; anybody can be buried in lawsuits and legal fees, ruining them financially. Even if you think you'll never get sued, you can never be too sure. Deciding whether you need umbrella insurance can be case-dependent. But, you should be aware that anyone can be sued, and many are not prepared to pay legal fees and the overall lawsuit cost. With that in mind, even wealthy people can benefit from umbrella insurance since it protects their savings and assets from being taken from a lost case.

The truth is that anyone can benefit from umbrella insurance. At the very least, it'll give you peace of mind and, at most, could save you millions.


Deciding whether umbrella insurance is right for you can take some consideration. It's important to note that it can mean the difference between being in massive debt versus paying nothing if there is an incident. Consider how much risk you're at for liability and the value of your assets to help your decision. In addition, it may help to speak with an insurance agent to assess your risk and adequately inform you about the policy.