Do I Need Umbrella Insurance?

By: Ben Cavallo, CIC, AAI, CISR

Together with partner Keith Signoriello, Ben Cavallo is the principal and co-owner of C&S Insurance.

do I need umbrella insurance?

Do I need umbrella insurance?

You may be asking yourself – “If I already have personal liability coverage under my auto and homeowners policies, why would I need ANOTHER policy? Do I need umbrella insurance?” Great questions.

Umbrella insurance, also known as personal excess liability insurance, acts like backup coverage for your home insurance and car insurance.

Umbrella insurance protects you against a variety of claims and lawsuits. Common causes of liability claims include at-fault car accidents or injuries occurring on your property. But personal liability claims can result from incidents that occur anywhere. Imagine that you’re coaching your daughter’s hockey team and accidently injure a player with a puck. Or if your dog seriously hurts someone at the dog park. Or if your teenage son posts a defamatory post on social media. Personal liability claims can also arise from allegations of libel, slander, or defamation of character.

When injuries occur, costs add up quickly, especially if a lawsuit comes into play. Meanwhile, the liability coverage in your home and auto policies has a limit. Often, these limits are not enough to cover serious incidents. Consider this scary statistic from Forbes:

“Liability coverage in home and auto policies rarely exceeds $500,000, yet 13% of personal injury liability awards and settlements are $1 million or more.”

This is why umbrella insurance is so important. When your auto or home policies have maxed out, umbrella insurance can bridge the gap. Without umbrella insurance, any damages or defense costs owed beyond your liability limits may be taken from your bank account, your future income, or other assets.

Who needs umbrella insurance?

Umbrella insurance makes sense for lots of different people–especially those who:

  • Own property
  • Own a business
  • Have accumulated significant savings or assets
  • Own potentially risky items (e.g. dogs, boats, pools, trampolines, etc.)
  • Have an increased likelihood of being sued (e.g. landlords, youth sports coaches, board members, etc.).

How much umbrella insurance do I need?

It’s impossible to answer this question broadly; your individual financial picture will dictate the coverage amounts that make sense. As a general rule, financial advisors recommend average homeowners have at least $1 million in umbrella insurance, even if your assets are worth less than that.  If you own rental property, your umbrella  needs may be more  in the ballpark of $3 million to $5 million. But again, it’s best to sit down with an expert and review your needs.

How much does umbrella insurance cost?

Not as much as you might think. Umbrella policies are comparatively inexpensive because they only kick in once your base liability coverage is exhausted. A single household with two cars and two drivers can expect to pay around $200 annually for the first $1 million in umbrella coverage. (Keep in mind, this is only an estimate. Having more household drivers or relatively inexperienced drivers, along with other factors, could skew this figure.)  Still, $20-$30 per month is not a lot of money for so much added protection.

Have questions about umbrella insurance? Still not sure if you need it? Let’s chat.