What Is Umbrella Insurance and What Does It Cover?
Updated
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Homeowners insurance acts as a layer of protection against financial loss. But it's important to consider whether a standard homeowners policy is sufficient. Homeowners concerned that they may not have enough coverage have the option of adding umbrella coverage to their policies. Here, we'll cover what homeowners umbrella insurance is, how it works, what it covers, and if the average homeowner needs umbrella coverage.
Umbrella insurance coverage provides an extra boost of protection, above and beyond the existing limits of other policies. For example, an umbrella policy can provide for:
While a homeowner normally has some level of coverage for each of these losses, it may not be enough to fully compensate them if anything goes wrong.
Imagine you're a fourth-grader dealing with a bully on the playground. For the most part, you can handle the bully's mouthiness on your own. It's only when the bully pushes you that you need backup. Fortunately, you have a sixth-grader looking out for you, making sure nothing bad happens. That's what the best umbrella insurance policy is -- extra protection when you need it most.
Let's say you have friends over and their kids are playing in your backyard. A neighborhood dog wanders into the yard, bites one of the children in the face, and you rush the child to the hospital. When it becomes clear that the child faces plastic surgery and extensive medical bills, the parents sue you for damages. Because you have umbrella coverage, you have additional liability coverage that handles the cost.
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Umbrella insurance is there to make sure nothing "falls between the cracks" and that the homeowner is protected. Here's some of what it covers:
Important note: Umbrella coverage does not just cover the homeowner, but every member of their family.
While umbrella insurance is a great way to fill gaps in coverage, it does not cover everything. Typically, this is what isn't covered:
According to the Insurance Information Institute, a homeowner can buy a $1 million personal umbrella liability policy for $150 to $300 per year. When choosing homeowners insurance, it's important to factor in umbrella insurance costs.
The short answer is "probably." Unless a homeowner has enough cash available to see them through an unexpected injury or lawsuit, umbrella insurance can mean the difference between financial solvency and bankruptcy.
Normally, once a homeowner has a policy with a liability limit of $300,000, an insurer will recommend an umbrella liability insurance policy for $1 million of additional coverage. For a homeowner worried that might not be enough, it's good to ask an agent directly, "How much umbrella insurance do I need?"
If a homeowner prefers to stay with their current insurance company, they should call their agent and find out how much personal umbrella insurance will cost. If the price works with their budget, it's just a matter of adding it to their existing coverage. Homeowners in the market for a new insurance company can call an independent insurance agent to help them find the most competitive home insurance rates, including umbrella coverage. Any reputable insurance agent will be more than happy to provide customers with an umbrella insurance quote.
The tricky thing about life is our inability to know what's going to happen next, and that's where umbrella insurance comes in. When liability protection through a standard policy is not enough to pay the bills, a personal umbrella policy can cover excess liability. At an affordable coverage rate, the extra liability coverage offered by umbrella insurance coverage is more than worth the extra cost of $12-$25 per month. It's there if it's needed but unlikely to break the bank if it's not.
Unless a homeowner has the cash available to pay for anything not covered by their standard homeowners insurance coverage, an umbrella policy is absolutely worth the cost.
Normally, once a homeowner has a policy with a liability limit of $300,000, an insurer will recommend an umbrella liability insurance policy for $1 million in additional coverage.
An umbrella insurance policy does not cover physical property damage. Damage to your home is not covered by umbrella coverage. An insurance agent can tell you about specific riders that do cover property damage.
Liberty Mutual, Progressive, and Farmers provide excellent umbrella coverage at a fair price.
Anyone without enough cash to pay for out-of-pocket expenses not covered by their traditional homeowners insurance needs an umbrella insurance policy.
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