How to Add a Personal Liability Umbrella Policy

I’m considering getting an umbrella liability policy for my home and cars. Can I do that if I have my home and auto insurance with two different companies? Also, how much do umbrella policies cost? --John Culbertson, Port Neches, Tex.

CALCULATOR: How Much Umbrella Insurance Do I Need?

An umbrella liability insurance policy helps protect your assets and future earnings from lawsuits. It kicks in after you’ve exhausted the liability coverage from your auto or home insurance policy. Some insurers require that you have both auto and home insurance with their company before they sell you an umbrella policy, but most will sell you a policy if you have either home or auto with them (and a few insurers issue stand-alone umbrella policies). You typically get a 5% to 10% discount per policy if you buy them together, says David Spencer, senior vice-president of insurer ACE Private Risk Services.

To qualify for an umbrella policy, you generally must have at least $250,000 in liability insurance on your car and $300,000 on your home, says Bill Howard, an independent insurance agent in Alexandria, Va. The insurer may offer you a discount on your umbrella policy if your coverage exceeds those amounts.

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The age and driving records of people in your household and other factors affect premiums: A $1 million umbrella policy runs $175 to $300 a year for a family with a house and two cars and no special risks, says Spencer. (A $5 million policy generally costs up to $800 a year.) Go with the higher end if you have a teenage driver, a swimming pool or other big risks, or assets worth over $1 million. Some insurers include legal fees in the coverage; others cover them above the policy limit. Boosting your auto and home insurance deductibles by, say, $500 can help you afford the umbrella coverage.