Umbrella Insurance

Liability insurance protects home and auto owners from financial chaos in the event of a loss.  But, the damages can sometimes exceed the limits of their liability policies.  Umbrella insurance, which provides additional liability protection, can prevent this scenario.

What Is Umbrella Insurance?

Umbrella insurance is often referred to as excess liability coverage.  Excess liability provides higher limits on the coverage you already have.  The umbrella policy, however, not only pays out for excess damages; it will also cover legal fees if you are accused of libel or slander.

It is a type of personal liability insurance that not only protects the policyholder but covers family members as well.  

Who Needs an Umbrella Policy?

You aren’t required by law to have umbrella insurance, so who needs an umbrella policy?  Typically, people who are a high risk for lawsuits, or who have many assets often purchase umbrella insurance.  For instance, you’ll want umbrella coverage if you:

  • Have significant savings or other assets.
  • Own, rent, or lease property.
  • Own trampolines, swimming pools, dogs, horses, or guns.
  • Host parties in your home frequently.
  • Participate in or coach sports where you could injure others.
  • Post reviews of businesses or products.
  • Are an established public figure.
  • Worry about liability claims against you when traveling outside the U.S.

Keep in mind that you must carry the minimum amount of property or auto insurance to qualify for umbrella coverage.  

What Does It Cover?

An umbrella policy covers you and your family members against lawsuits evolving from personal injuries or property damage you caused.  Depending on the policy you choose, umbrella insurance can also provide coverage for:

  • Landlord liability
  • False imprisonment
  • Defamation of character
  • Wrongful entry
  • Malicious prosecution
  • Invasion of privacy  
  • Costs for legal defense

For the most part, umbrella insurance covers claims that are excluded by other liability policies.  

What Is Not Covered?

Umbrella insurance doesn’t cover your personal injuries or personal property damage.  It will not cover liability claims related to your business. However, commercial umbrella policies are available.

Intentional or criminal acts by the insured are not generally covered by an umbrella policy.  Intentional acts are defined in an insurance policy as acts that cause expected or intended bodily injury by the insured.

Boats or other watercraft aren’t typically covered by most insurance companies.  However, if you have boat insurance, you may qualify for umbrella insurance on the vessel.

How Does It Work?

Insurance jargon can be confusing for everyone, so don’t worry if you are still unsure about how umbrella coverage works.  Here are a few examples of how an umbrella policy can be helpful:

  • You cause a multi-vehicle accident and your auto insurance property damage limits aren’t high enough to pay for all the damages.  Plus, your personal liability limits are too low to cover everyone’s medical bills.
  • Your son or daughter was involved in a fight at school and injured another person.  The injured child’s parents sue you.
  • Your dog gets loose and attacks a neighbor.  You are sued by the neighbor for pain and suffering, lost wages, and medical bills.
  • You accidentally hit a building with your car causing severe damage.  If your auto insurance doesn’t cover all of the costs, your umbrella policy will kick in.

Using another example:  If medical bills or property damages total 0,000, but your liability insurance limit is 0,000, an umbrella policy will cover the remaining 0,000.

What Can You Lose In a Lawsuit?

Almost anything of value that you own can be taken in a lawsuit.  It is estimated that more than 40 million lawsuits are filed every year. So, you never know when you could get involved in one.  The best protection is to have the right insurance coverage beforehand.  

It is possible to lose your home, life savings, automobile, and future income due to a lawsuit. The list also includes personal property such as art objects, jewelry, cash, trusts, contents of your safety deposit box, and more.  You could lose everything you’ve worked hard for. 

What Is the Right Amount of Umbrella Insurance for You?

An umbrella policy should provide enough liability insurance to protect your net worth.  An easy way to determine this is to calculate the value of your assets.  Include savings, investment accounts, and any property you own.  If the total is greater than your existing insurance, you need enough umbrella insurance to cover the difference.

Keep in mind that 401(k) accounts and IRAs may not be covered by an umbrella policy.  A 401(k) account is protected from lawsuits by the Employee Retirement Income Security Act of 1974. IRA accounts are not protected by this law, except for funds rolled over from another account.

Most insurance companies sell umbrella insurance in increments, with the cheapest being $1 million in coverage.  You can choose coverage anywhere in the range of $1 million to $10 million.  

Can You Afford Umbrella Coverage?

On average, an umbrella policy will cost about $383 per year for $1 million in coverage, according to Forbes Advisor.  The cost of an umbrella policy is based on several factors including:

  • Your net worth
  • Where you live
  • Driving record
  • Credit history
  • Potential future income loss

An individual who owns only one home and one or two cars can purchase umbrella insurance that meets their needs without incurring excessive costs.

Umbrella Insurance Requirements

You can obtain umbrella insurance through most insurers who sell home, auto, and boat insurance.  But, you’ll be required to have a base policy with specified limits.  For instance, you may be required to carry a $300,000 homeowner’s liability before you can obtain an umbrella policy with some providers.  

For automobile umbrella coverage, you need a base policy with $100,000 per person / $300,000 per occurrence of bodily injury, and $100,000 property damage.  

To obtain umbrella insurance on watercraft, you must first have a base watercraft policy with a $300,000 limit of liability. 

Where to Buy Umbrella Insurance

Most insurance companies sell umbrella insurance but require you to carry your home, auto, or renters insurance with them. They will also require a minimum amount of liability coverage on those policies before you can qualify for adding umbrella insurance.

Some companies offer stand alone umbrella policies without requiring that you have other policies with them.  If your current insurer does not provide umbrella insurance, at least you won’t have to switch your entire insurance package over to another company.

Remember, the cheapest or easiest to obtain insurance isn’t always the best choice.  Some of the cheaper insurance policies may not provide adequate coverage if you have a lawsuit filed against you.  Take time to research the insurance company’s claims handling practices and payout response times.

Sandifer Insurance Provides the Right Coverage for You

Finding the right insurance can be easy if you come to Sandifer Insurance Agency.  Over the past 40 years, we have helped thousands of clients protect their assets and families.  If you are considering umbrella insurance, homeowners, auto, farm, or life insurance, we can help.  

Sandifer is a family-owned, local company that takes pride in serving customers from Cheraw, SC, and surrounding areas.  Our team is eager to welcome you to our family of satisfied customers.

Contact Sandifer Insurance Agency to talk with one of our industry experts today.  We will make sure you get the right amount of coverage with a trusted provider at an affordable rate. 


  • – Umbrella Insurance: How It Works and What It Covers