What is Umbrella Insurance?

Sure you've heard the term, but what is umbrella insurance?

Umbrella policies provide extra protection beyond standard coverage, and they are available in increments of a million dollars.

Young asian businessman sitting at the table with laptop and holding umbrella over gray background. Looking up

Sometimes known as excess liability or personal liability insurance, umbrella insurance is often a separate insurance policy that does not stand on it's own.  Instead, it adds another layer of liability protection on top of the liability built into other policies you have, including auto, homeowner's or renter's insurance. It's designed to kick in when the liability coverage limits on those policies have been exhausted.

Why might I need an umbrella policy?

For example, if you or your teenage daughter cause an accident while driving one weekend evening and the driver of the other car suffers life-threatening injuries, the costs of their medical care can quickly surpass the liability limits on the auto insurance policy.

Also, with the cost of vehicles and repairing them quickly increasing, liability limits may not cover the cost of repairs to a third party's vehicle if they are driving a high-end car.

Without umbrella coverage, all of those excess costs above the limit would have to be paid by you out of pocket. If that injured driver requires lifelong care, you could be staring at millions of dollars in liability.

It's not impossible to see that you might have to sell assets, drain your investment and bank accounts and maybe even lose your home to pay.

Umbrella insurance, in other words, helps protect your assets and future income from the effects of one catastrophic claim.  

You can check out a true story from one of our clients here.  

What does umbrella insurance cover?  

  1. Bodily injury liability - Umbrella insurance covers the cost of injuries to another person, and may include the cost of medical bills and liability claims that are the result of injuries to: 
  • Other people, due to a car accident where the policyholder is at fault.
  • Other people, caused by a pet owned by the policyholder.
  • Guests in the policyholder's home, due to a fall or some other accident.


  1. Property damage liability - This covers the cost of damage or loss to another person's tangible property, and may include the costs associated with: 
  • Damage to vehicles and other property, resulting from a car accident for which the policyholder is found at fault.
  • Claims incurred in connection with damage caused to the property of others.
  • Accidental damage caused to school property by a child.


  1. Other personal liability - This portion covers other actions a policyholder could be sued for, and may covers acts such as:
    •     Slander (an injurious spoken statement)
    •     Libel (an injurious written statement)
    •     False arrest, detention, or imprisonment
    •     Malicious prosecution
    •     Mental anguish or shock.


  1. Legal costs - The insurance will respond to the costs of legal fees, court costs as well as the cost of settlements and judgments in relation to the above three items.


What does an umbrella insurance policy cost? 

Most insurance companies offer these policies starting at $1 million worth of coverage, and go up as high as $10 million in some cases. There are a few companies targeting people with higher net worth ratings, and they offer policies as high as $50 million, and sometimes more.

The majority of people who buy umbrella policies pick a standard $1 million policy, but there are quite a few who choose policies totaling $2 million for added protection.

The best part about umbrella insurance is how affordable it is. For the first $1 million, the premium can be as low as $300 or so per year but can go higher depending on your situation.      

I would like a quote for an umbrella policy

However, it may be higher if a person has more than two cars, has points on his or her record or has young drivers in the home. 

Often, insurers will only sell you an umbrella policy if you also insure your home and auto with them.

The takeaway

If you own a home and cars, you should seriously consider an umbrella policy to protect your assets in case of a serious event.

This is especially true for anyone who has sizable earnings, as they can count on being a target of liability attorneys if they are found at fault in an accident that injures a third party.

As always, exclusions, terms and conditions vary from policy to policy and from carrier to carrier and you should always consult with us to confirm your specific coverage.


What to do Next?

Have us review your insurance policies and check that your limits are sufficient. Ask what the cost is to bump it up under higher limit scenarios.

Call today 617-846-5000 or click here 24/7/365 and we will get back to you same day or the next business day