Insurance provides peace of mind; the more assets and wealth you accumulate, the more insurance you need to protect them. An umbrella insurance policy – an “umbrella” covering homeowners and auto policies – is an excellent option for high net-worth individuals because it protects you against lawsuits.
CarInsurance.com’s umbrella insurance policy calculator can help you figure out whether you need an umbrella insurance policy and for how much – policies are offered in million-dollar increments.
- A personal umbrella policy pays out when the underlying coverage has reached its limits.
- An $1 million umbrella insurance policy costs a few hundred dollars annually.
- An umbrella policy is ideal if you have many assets or need additional lawsuit protection.
How much umbrella insurance do I need?
To determine whether you need an umbrella insurance policy, input information about your financial assets and liabilities into the calculator below.
Remember, you must increase the liability limits of your homeowner and auto insurance policies before you qualify for an umbrella policy – check with your insurance company to see what underlying limits are required.
Do I need an umbrella insurance policy?
Umbrella insurance is a type of personal liability insurance that can provide additional protection beyond the standard limits of your auto and homeowners policies. It helps protect you against high-cost legal claims or settlements resulting from accidents or property damage caused by you or your family members.
“Umbrella insurance is a type of insurance coverage that adds an additional layer of protection for insureds against exposure from claims that exceed the underlying coverages,” says attorney George Salinas of George Salinas Injury Lawyers, a law firm in San Antonio, Texas. “While primary insurance policies are typically intended to cover the potential damages arising from a claim, there may be unique situations involving losses that can significantly exceed the primary coverages that most insurance companies sell. For this reason, umbrella insurance exists to protect people if this occurs. This is especially necessary for people with assets that they need to protect.”
If your net worth exceeds the coverage offered by auto and homeowners policies, umbrella insurance can provide extra security, allowing you to keep more of your assets safe from potential lawsuits.
When should you buy umbrella insurance?
You can purchase umbrella insurance at any time. However, if you are at risk of lawsuits or personal liability incidents, such as owning a trampoline or having weekend pool parties, consider investing in coverage sooner rather than later.
In general, having umbrella insurance provides peace of mind protection and can benefit anyone who wants additional coverage for accidents, teen drivers in their home, property damage and tenant incidents.
Learn about the top-rated umbrella insurance companies
Who needs umbrella insurance?
An umbrella policy can benefit almost anyone. It provides an extra layer of protection for you and your assets and provides coverage when you reach the limits of your primary policies. It can also be ideal if you have many assets or need additional lawsuit protection.
“Umbrella insurance will be particularly useful for people who meet two conditions: They have a large net worth and strongly dislike extreme risk,” says Michal Zator, assistant professor of finance at the University of Notre Dame’s Mendoza College of Business. “Umbrella insurance protects you against a catastrophic risk — some very unlikely event that can create a huge liability and turn your life upside down. For some people, even a very remote chance of such an event occurring, and their life savings being wiped out to cover the liability, is very stressful. If you are this kind of person, umbrella insurance with a limit close to your net worth may be right for you.”
“Umbrella insurance is ideal for those with high net worth and low risk tolerance.”
Michal Zato – Assistant Professor
University of Notre Dame’s Mendoza College of Business
A personal umbrella policy may be worth investing in if you’re:
- A homeowner or rental property owner
- Are a public figure
- Coach sports
- Have a teen driver in your home
- Have significant savings
- Host parties in your home
- Own a boat, pool, trampoline or guns
- Own certain dog breeds
- Serve on a nonprofit board
Remember, a personal umbrella policy pays out when the underlying coverage has reached its limits. If you decide to purchase umbrella insurance, most insurers will have requirements on how much liability you already have before they sell you a policy.
What additional protections does umbrella insurance offer?
In addition to personal liability, umbrella insurance provides lawsuit protection against slander and libel; false arrest, detention or imprisonment; malicious prosecution; and shock/mental anguish.
No insurance policies will cover you for criminal or intentional actions that result in bodily injury or property damage.
Guide to umbrella insurance: What it is and how it works
How much does umbrella insurance cost?
The cost of umbrella insurance varies depending on the coverage amount and your personal factors. According to Progressive, a $1 million umbrella insurance policy costs a few hundred dollars a year – the company offers policies up to $5 million.
“The cost of umbrella coverage varies based on the size of the umbrella, but the price is minimal relative to the added security it provides and much lower than the cost of primary coverage,” Salinas says.
Learn more: Is an umbrella policy a waste of money
Final thoughts: Umbrella policy calculator
Umbrella insurance provides liability protection beyond your car and home insurance policies. If you’re unsure whether you need a policy, use CarInsurance.com’s umbrella policy calculator to decide.
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