What is it?
Umbrella insurance refers to a liability insurance policy that protects your assets and future income beyond the standard limits in your auto and homeowner’s policies. It’s an umbrella because it covers liability claims from all policies underneath it, such as autos and homeowners policies.
For example, if you have an auto insurance policy with liability limits of $500,000 and a Homeowners policy with a limit of $300,000, then with a million dollar umbrella, your limits become in effect, $1,500,000 on the auto policy and $1,300,000 on a homeowners liability claim.
It also covers other liabilities such as the following:
- Libel
- Slander
- Invasion of Privacy
Why do I need it?
- Your automobile liability coverage may not be enough in a lawsuit. Most people have a $500K limit on their automobile liability insurance. The average payout in personal injury lawsuits can often be much higher. ( ie. Average award in Florida – $1,819,751, Average award in Michigan – $1,089,638)
- Your homeowners or renter’s liability coverage may not be enough in a lawsuit. Most homeowner policies are capped at $500K. Again, this may not be enough if an uninvited visitor to your home suffer an accident.
- You are self-employed. Your homeowner’s policy does not always cover activities that relate to self-employment. An umbrella policy will provide that extra coverage here.
For more background, read the a recent NY Times article on the topic.
What to look for?
Umbrella liability insurance is much less that most people assume. Here’s a general rule of thumb which can vary based on your individual situation.
- First $1M: $150-$300 per year
- $2M – $9m: An additional $150/year for each $1M in coverage.
- $10M or greater: Depends on your insurer.
You’ll want to find an insurer that has a number of other clients with your net worth profile. If that is the case, they will have a larger risk pool to work with and your rate will generally be lower.
How do I get it?
Start with your auto or homeowner’s insurance company. Typically they are more than glad to provide you with such a policy.
If you find that the premium is costly or you don’t qualify for some reason, try shopping your automobile, homeowners or renters and umbrella policy to other insurers via a broker. We’ve provide some leading online brokers below.
- NetQuote: BBB Accredited.
- InsWeb: BBB Accredited. Recommended by Forbes and Kiplingers.
- Insure.Com: BBB Accredited. Forbes Top Pick.
