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What Does Umbrella Insurance Cover?

What Is an Umbrella Insurance Policy?

When it comes to protecting your financial stability and having peace of mind, umbrella insurance is extra liability coverage that goes above and beyond the limits of your other types of 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 An Umbrella Insurance Policy Works

Personal liability umbrella 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.

What Does Umbrella Insurance Policy Cover?

Sometimes referred to as umbrella coverage — or an umbrella policy — umbrella insurance is designed by insurance companies to better protect your assets, savings and future income from large liability claims or court judgements that could otherwise devastate your finances.

It’s coverage that only activates after other existing or underlying liability insurance coverage limits have been reached, like those typically found in a renters, car, homeowners or business policy. But the policy has its limitations:

What Umbrella Insurance Usually Covers
What Umbrella Insurance Usually Doesn’t Cover
Commercial or landlord liabilities
Personal property or belongings
Personal injury
Criminal acts or omissions
Property damages
Contractual liabilities
Bodily injury
Business losses
Slander or lible judgements
Intentional damage
Lost income to others
Contracts — written or oral
Legal costs
Criminal prosecution

How Much Does the Average Umbrella Insurance Cost?

Several considerations influence the cost of your umbrella insurance policy, such as the amount of coverage, your location, and the number and type of underlying exposures you have (for example, cars, recreational vehicles, homes). Umbrella premium is typically a small portion of your total insurance costs.

Is Umbrella Insurance Worth It?

If you’re found liable for damages that exceed the coverage limits on your auto or home policies, it’s protection you’ll likely find is worth every penny.

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 and the property you own. Other risk factors to consider are your net worth and the total value of your assets. Your bundled insurance options will also play a role in your cost in addition to other types of coverages you’re carrying.

Save on Umbrella Insurance by Bundling Your Policies

Everyone enjoys saving money, much as everyone truly needs insurance to protect families. But, how can bundling insurance help save you on your premium payments?

Why bundle insurance?

Bundling is buying multiple insurance policies from the same company. We offer auto & home, auto & renters, auto & life, motorcycle & home, home & umbrella policies, and more.

With our multi-product discount, you can save up to 23% on auto and home insurance. Plus, you can use the MyAmFam app or My Account to easily check your premiums, effective dates, and policy info to save time and simplify the claims process.

What are the benefits of umbrella insurance for bundle insurance holders?

Whether an accident occurs at home or on the road, you may be held responsible for injuries or damages. There may be some costs your home or auto insurance won't cover. Umbrella insurance can help you cover what's left after your home and car insurance run out.

Under an umbrella policy, you are covered for damages over and above your primary liability limits. It also covers legal expenses you may have to pay.

Simply put, a good umbrella policy can give you peace of mind and help you save you money.

5 Benefits of Umbrella Liability Insurance Coverage

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.

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 coverage 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.

Consider the added financial burden without umbrella insurance coverage in place:

  • If you hit another car and caused serious injuries to others
  • If your dog bites a guest
  • If a guest falls or trips on your property that results in an injury

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 all your recreational vehicles 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. Umbrella liability policies can cover everyone and are ideal for you if your assets exceed your home and car insurance limits. It can also pay for expensive claims or lawsuits, so you don't have to dig into your savings.

    Traveling, building a swimming pool, owning a boat or recreational vehicle, or having children or pets are good reasons to have umbrella protection.

  2. 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.

  3. You must, at a minimum, have an existing auto, renters, condo, manufactured home or home insurance policy. This is because umbrella insurance is offered as an addition to your current coverage. In that underlying policy, your liability limits must meet a minimum threshold of at least $300,000 for American Family Insurance property policies. Be sure to check in with your agent to understand how your coverage can qualify for additional umbrella insurance protection.

  4. Umbrella insurance is a great idea for those with assets and future earnings that need protection. 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.

    Additionally, you may want to add optional underinsured and uninsured motorist coverage to your umbrella policy as an added layer of protection over your underlying motor vehicle policies.

  5. With personal umbrella coverage, we’ve got your back. At American Family Insurance, we 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
  6. 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 Liability Umbrella 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. 

*Customers who bundle auto and home insurance policies may save up to 23% on both policies together (as of October 2021).

Discounts may vary by state, property, policy form and company underwriting the auto and/or home policy. Discounts may not apply to all coverages on an auto or property policy.

This article is for informational purposes only and includes information widely available through different sources and does not afford or guarantee any coverage.

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Related Topics: Home Insurance , Car Insurance , Insurance Terms , Insurance Needs