Wealth Blog Post

Understanding Umbrella Liability Insurance

George Grombacher February 23, 2022

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Understanding Umbrella Liability Insurance

Don’t I already have insurance that covers this?


Probably. Your homeowners insurance and auto insurance commonly provide coverage for personal liability.


But is it enough?


That’s the key question I hope to help you answer.


Understanding umbrella liability insurance can help you make an informed decision if you need to add one of these policies to your insurance portfolio.


Here’s what we’ll cover:


  • What is umbrella liability insurance?


  • Who should have umbrella liability insurance?


  • How much coverage should I have?


  • How do I get one of these policies?


Let’s get started.


What is umbrella liability insurance?


Just as the name implies, these policies provide an additional “umbrella” of coverage over you and your family.


The policy provides additional coverage should you be liable for amounts above and beyond your existing coverage (more on this later).


They provide coverage for injuries, property damage, lawsuits, as well as circumstances you’re personally liable for.


On top of that, umbrella liability will also protect you against claims brought about by false arrest, slander, libel, and any rental real estate you may own.


These policies don’t cover everything. They will not cover:


  • Damage done by you to your own property


  • Damage or injury inflicted intentionally by you or someone in your household


  • Liability incurred in the course of your professional or business activities


  • Military or war related damage


Who should have umbrella liability insurance?


Because of the affordable nature of these policies, if you are someone with assets or an income of over $100,000, an umbrella policy probably makes sense to own.


If you own a business, you should have this coverage.


If you own rental properties or investment real estate, you should have this coverage.


If you drive a car, you should have this coverage.


If you publish opinions online, or provide commentary on other people, you should have this coverage.


If you have kids, you should have this coverage. These policies cover not only the policyholder, but all other members of the family/household.


How much coverage should I have?


It’s my hope you’ll never be involved in an accident or find yourself the defendant in a lawsuit. These policies exist in case you find yourself in one of these predicaments.


First, you need to figure out what your current insurance covers. Let’s say your auto insurance policy has a limit of $300,000, and you get in an accident where you’re liable for $500,000. In this scenario, you would like to have an additional $200,000 coverage in the form of an umbrella policy to make up the shortfall.


The good news is a $1,000,000 policy won’t cost you more than $300 a year.


With that in mind, I think owning one of these policies is a no-brainer.


How do I get one of these policies?


You can buy a policy from the same insurance company you have your homeowners or auto insurance from.


It may be possible to get a discount, or to add additional coverage to an existing policy.


I recommend people work with an agent who can take a look at their overall financial and insurance situation and make recommendations of the right coverage and policy.




Because of the litigious nature of our society, and the low-cost of these policies, I recommend most people own an umbrella liability policy.


You can also get quotes from one of our Certified Partners, the Zebra.

Check out our The Right Coverage course to ensure you’ve got the right protections in place. 

If you’re ready to take control of your financial life, check out our DIY Financial Plan course. 

We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course. 

Connect with one of our Certified Partners to get any question answered. 

Stay up to date by getting our monthly updates.


Here are two episodes of the LifeBlood podcast that apply:


Personal Lines Insurance with Justin Staebler

Your Personal Safety Net with Harry Stout


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