Insurance is supposed to shield you from significant financial losses in the event of a disaster, such as a fire, car accident, medical emergency or unexpected death. But sometimes, your insurance doesn’t go far enough or cover all of life’s misfortunes. For that, you may need umbrella insurance.
An umbrella insurance policy provides additional coverage outside the limits of other policies you have, along with certain expenses not typically included in your existing insurance policies. For example, umbrella insurance protects you if a guest in your home falls and sues you for damages, if you’re sued for libel or slander, or if you’re involved in a catastrophic car accident that seriously injures another person.
Circumstances that umbrella policies typically don’t cover include liability or damages related to your business, your personal belongings, or oral or written contracts.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Peter Piotrowski, chief claims officer at insurance provider Hippo Insurance, says people who own potentially aggressive dogs or high-risk possessions, such as a swimming pool, should consider adding an umbrella policy. He also recommends purchasing umbrella insurance if you have teenage drivers, since they’re more likely to get involved in an accident that exceeds coverage provided by your existing car insurance. Additionally, umbrella insurance is a good idea if you have a high net worth — say, $500,000 or more — because individuals with a lot of assets are more likely to get sued, he says.
To qualify for an umbrella insurance policy, you must already have homeowners and auto coverage. In addition, you’ll usually need to have at least $250,000 of liability coverage on your car insurance policy and $300,000 of liability coverage on your homeowners policy, according to the Insurance Information Institute.
You may be able to get a discount on your policy if you bundle it with your car or home insurance, depending on the amount of umbrella insurance you purchase and your state of residence. If you’re shopping around for a stand-alone umbrella policy with a new insurer, you can comparison shop on websites such as ValuePenguin and The Zebra.
Calculating umbrella insurance coverage
Add up the value of all your assets, including the amount of equity in your home and the value of your brokerage and retirement accounts. Kiplinger provides a calculator you can use to estimate the amount of coverage you need.
The application process for umbrella insurance is similar to that for other types of coverage. You’ll need to submit info about your income, assets and existing insurance policy limits before gaining approval. The amount of insurance you need will vary depending on your location, age, credit history and other factors, says Divya Sangameshwar, insurance expert with ValuePenguin, a consumer website that provides insurance research and analysis.
Cost of umbrella insurance
Umbrella policies are usually sold in increments of $1 million of coverage, up to $5 million. Premiums for $1 million in umbrella coverage range from $150 to $350 a year, and annual premiums on policies of $2 million to $5 million can range from $650 to $1,000, Sangameshwar says. As is the case with other types of insurance, rising labor costs and an increase in catastrophic weather events have led insurers to raise umbrella insurance premiums. The number of umbrella insurance claims more than doubled between 2010 and 2020, and the size of payouts increased by 67%, according to Safeco Insurance, a division of Liberty Mutual.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
-
Retirement Health Care Costs Are On the Rise: What You Need to KnowA 65-year-old retiree will face significantly higher lifetime health care costs than they would have a year ago, even with Medicare. Here are the surprising totals.
-
Virginia Tax-Free Weekend 2025 Is Here August 1–3: What to KnowSales Tax Three days, no sales tax. Here’s what qualifies for Virginia’s tax-free weekend.
-
You Need to Have This Financial Talk With Your SpouseWomen are poised to inherit significant wealth from their husbands. Here's how they can prepare for it.
-
Three Ways to Find Deals in Your Investments This YearLooking for ways to save because of tariffs? Don't forget to look for deals in your investments. Here are three expert tips for making a little extra this year.
-
Surprising Ways to Find Deals on Cars Despite TariffsLooking for a new car? Tariffs will make good deals harder to find, so use these expert tricks to get a lower purchase price and keep long-term costs down.
-
Don't Miss Out on These Four Credit Card BenefitsCredit card benefits aren't always limited to cash back, points and miles. Check whether your existing card offers these valuable extras — or switch to one that does.
-
Smart Ways to Save Money at MuseumsWant to save money at museums, art galleries, zoos and gardens? Use these tips to get free or discounted admission to national and local collections.
-
How to Find Deals on Travel in 2025Finding deals on travel is an excellent way to cut costs in 2025, as tariffs start to bite. Here are three suggestions for lowering the cost of your next trip.
-
Strategies to Spend Less on Clothing and Online Shopping in 2025It's easy to spend less on clothing and other goods when shopping online. Arm yourself with these expert tricks and tools that will help you grab a bargain.
-
Three Ways to Spend Less on Groceries This YearMore of us are looking to spend less on groceries this year, as tariffs affect food bills. Here are three smart ways to keep grocery costs down.
