What Are the Benefits of a Personal Umbrella Insurance Policy?

by Mike Parker
The average emergency room bill was more than $1,200 in 2012.

Think about all the TV commercials you see from lawyers encouraging you to sue medical companies for malpractice, or trucking companies for causing an auto accident. It's not just big corporations that get sued for millions. If you cause an accident that results in major property damage or substantial personal injuries, the price could far exceed the limits of your ordinary insurance policy. That's where you really see the benefits of an umbrella policy.

Why You Need Umbrella Insurance

The personal liability portion of your homeowner's policy typically starts at around $100,000 worth of coverage, but with skyrocketing medical costs, that amount can be eaten up quickly. The Insurance Information Institute advocates carrying at least $300,000. Minimum auto liability insurance starts at as little as $10,000 in some states, but auto site, Edmunds.com, advocates carrying at least $100,000. Once you've exhausted the limits of your homeowner's or auto insurance policy, you're on your own with any excess damages. In a major case, that could result in financial ruin.


Your umbrella personal liability insurance policy isn't a stand-alone policy. It is designed to work in tandem with your existing personal liability insurance policies. Your umbrella policy only kicks in after you've reached the limits of your other liability policies. Since your umbrella policy doesn't get tapped until your other policies are exhausted, the cost to carry umbrella insurance is remarkably affordable. An additional $1 million worth of coverage typically costs between $150 and $300 per year, according to the Insurance Information Institute. Each additional $1 million will run between $50 and $75.

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Asset Protection

You might think umbrella insurance is only appropriate for the wealthy, to protect their substantial assets if someone goes after them in a lawsuit. But people in the middle-class can hardly afford a major damages claim due to a neighborhood child getting injured on their trampoline, swimming pool, hot tub, or even something as seemingly safe as a swing set or barbecue grill. An umbrella policy can provide the added peace of mind that comes from knowing you hard earned assets are protected from lawsuits.

Extended Coverage

In addition to property damage and personal injury claims, umbrella insurance also covers you against damages due to a plethora of events you might not even consider to be insurable. For example, some umbrella policies cover you against lawsuits and judgments for slander, libel, false arrest, invasion of privacy, malicious prosecution, wrongful entry and false imprisonment. All policies have some limitations, and policy provisions can vary from state to state, so it's worthwhile to read and understand what your policy covers.

About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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