Do You Need an Umbrella Liability Policy?

You have liability coverage included in your auto insurance policy in case of a car accident. You have liability coverage included in your homeowners/renters’ policy in case of a property accident. Maybe you even have liability coverage through another personal insurance policy, like your watercraft policy, in case of an accident on the water. You’re all covered, right? Well, it turns out, you might not be.

But, lucky for you, there’s another type of policy that can tag additional liability coverage onto your policies without emptying your wallet. What is this policy called? An umbrella liability or excess liability policy.

An umbrella liability policy serves as additional protection for your assets when coupled with the liability portion of a standard auto insurance homeowners/renters’ insurance, and/or other personal coverage policy. While these standard types of policies do provide you with some liability coverage, there is a chance that in some situations where legal recourse comes against you, the policy limits would not cover all the associated costs simply due to magnitude. Your policy limits are just that – limits. Your carrier will not pay out above that limit in the event of a claim, no matter the circumstances.

While an unfortunate incident is likely not just around the corner, or anywhere around the corner, hopefully, being prepared in case something does happen is always a proactive way to approach the situation.

What Does an Umbrella Liability Insurance Policy Cover?

As stated above, umbrella liability policies are a secondary form of liability coverage that you can obtain to protect you in the event of litigation. According to The Balance and the Insurance Information Institute, umbrella liability insurance can protect you if the following circumstances arise:

  • litigation resulting from property damage and/or injury
  • legal defense costs if you get sued for damages to other people’s property and/or injuries
  • libel and slander claims brought against you

Do I Need Umbrella Insurance?

Deciding if you need an umbrella liability policy and how much coverage you require depends on a variety of factors, such as the current liability coverage limits on your standard personal insurance policies, the value of your current assets, your potential future income and assets, and what risks you currently face or might face in the near future. The main thing to consider is that it is difficult to predict what the award granted to an injured party might be and if an accident should happen, your current coverage may not cover everything.

It is important to note that while an umbrella liability policy may appear to make sense only for someone with significant assets, the reality is that anyone can be held responsible for a large sum of compensation to another party in the event of an accident resulting in property damage and/or injury. Even if you do not currently possess the assets or income to pay off such a significant sum, you may have to pay out of your future income.


In order to obtain an umbrella liability policy, you must have a primary policy in place. According to The Balance, for “the umbrella policy to start paying out coverages, a primary liability policy must be in place, and have maxed out on claim payments.” The company that underwrites the umbrella liability policy will set forth the requirements and restrictions for the policy and these will vary in language and content and range from requirements of other policies you must possess through their company to whether the policy will be classified as an endorsement or a standalone policy. 

An additional factor to keep in mind is that you may be required to carry higher liability limits on your other personal policies than is required by law. According to the Insurance Information Institute, “because

the personal umbrella policy pays out after the underlying coverage is exhausted, most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before they will sell you an umbrella policy.”


Ready for the good news? If you decide it might be in your best interest to obtain an umbrella liability policy, you can do so for a very reasonable cost. The cost will vary depending on the carrier and how much coverage you choose to purchase, but as the Insurance Information Institute notes, on average “you can buy a $1 million personal umbrella liability policy for about $150 to $300 per year.”

Considering the potential monetary sum you might owe if an unfortunate accident puts you in a difficult legal situation, these policies are relatively inexpensive. If you have questions or would like to obtain a quote, please contact our Personal Lines department.


Insurance Information Institute, “What is an umbrella liability policy?”

The Balance, “Do You Need Umbrella Insurance? What Is It and How Can It Help You?”