What Is an Umbrella Insurance Policy?

When it comes to protecting the things that matter most and added peace of mind, umbrella insurance is extra liability coverage that goes above and beyond the limits of your other insurance policies. Your umbrella insurance policy may also cover some situations that aren’t covered by your primary policies. The term umbrella is used to reference this broad reaching coverage.

How Umbrella Insurance Works

Personal umbrella liability insurance acts like a second layer of financial protection that comes into focus after your primary liability limits have been met and may even cover you in certain situations when your other policies don’t. If you’re looking for extra security, umbrella insurance is an answer that can help to secure future earnings, guard against wage garnishment and protect everything you’ve worked so hard for.

What Does Umbrella Insurance Cost?

According to the Insurance Information Institute, the average umbrella policy costs about $150 to $300 per year and for that small annual sum, you’ll get around $1 million in personal umbrella liability coverage. The primary factor in determining cost comes down to one simple question to ask yourself — how much umbrella insurance do I need? The answer to that lies in your location, property you own, assets and other risk factors. Your bundled insurance options will also play a role in your cost.

5 Things to Know About Umbrella Liability Insurance

While most people have heard about umbrella insurance, not everyone understands how it works. If you’re asking yourself, “what does umbrella insurance cover,” then look no further. We’ve uncovered five facts about umbrella insurance that may surprise you:

1. Personal injury coverage


One great way personal umbrella insurance protects you online is with coverage for libel, slander and defamation of character. If you’re found liable for slanderous comments made online, this coverage can help pay for the related costs and legal fees. This important coverage may not be included in your standard homeowners or renters policy.

2. Protects assets and future earnings


You’ve saved hard for those things that matter in your life — an umbrella is designed to help protect your goals. Imagine if you accidentally hit a bicyclist and are found liable. If the damages are $1 million and your auto insurance covers up to $250,000, then your umbrella will step in and cover the remaining $750,000, leaving your savings and future earnings intact.

3. Extra protection over recreational vehicles

Extra protection over recreational vehicles

Most people think of an umbrella policy as an extra layer of protection added to their home and auto insurance policies, but it actually extends further. If you enjoy recreational vehicles, you’ll be happy to discover that an umbrella policy can also extend liability over your boat, motorcycle, snowmobile, ATV/UTV, etc. Check with your agent to make sure your recreational vehicles are covered.

4. Legal defense costs

Legal defense costs

If you are sued, your umbrella insurance will cover your defense costs in most cases, regardless of fault. Legal defense costs are covered in addition to your policy limit.

5. Provides worldwide coverage


Are you planning on traveling in the future? An umbrella policy is a great travel companion. If you’re involved in an incident or want some extra liability protection during your travels in the United States or abroad, your umbrella policy gives you added security. Other underlying policies may not provide this liability protection.


  1. Generally speaking, yes. For earners who wish to protect current and future assets, an umbrella insurance policy is coverage worth serious consideration. With $1 million of umbrella liability insurance, you’re protecting your finances if you’re sued and forced to pay a legal judgement beyond the limits of your current auto insurance coverage.

  2. You must, at a minimum, have an existing auto or home insurance policy. This is because umbrella insurance is offered as an addition to your current coverage.

  3. Umbrella insurance is a great idea for those with assets and future earnings that need protecting. Medical costs and jury awards are trending upwards - the liability limits on your underlying home, auto, or recreational vehicle policies may not be enough to cover injuries or damages from an accident you are liable for. With Umbrella coverage, you’ll have another layer of protection for your savings after your primary underlying insurance liability limits have been met.

  4. With personal umbrella coverage, we’ve got your back. We’ll protect more than just you with this great policy. We’ll cover:

    • You and your spouse
    • Anyone named on your policy
    • Relatives living with you
    • Your legal representative, if you were to pass away
  5. Having coverage for lawsuits can make a big difference, particularly with the liability risks of driving a car daily. But there are other good reasons to get covered as well. Some additional reasons to consider an umbrella policy are if you:

    • Drive during rush hour, where the odds of getting into an accident are increased
    • Drive to and from work every day
    • Own a home
    • Own or use recreational vehicles such as ATVs, snowmobiles, boats, etc.
    • Own a dog
    • Have a swimming pool
    • Have a trampoline
    • Have guests over regularly

Find the Personal Umbrella Liability Coverage You Need

If you’d like to take advantage of liability coverage from an umbrella policy, contact your American Family Insurance agent to learn more about how you can benefit and get a personalized umbrella insurance quote today. 

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