Your home and auto insurance policies cover medical bills, lost wages and other costs incurred when a person becomes injured at your home or in a collision with your vehicle. When a serious incident exceeds your coverage limits, however, another party can sue you for the remainder if you were partially or totally at fault for the incident.

An umbrella policy can shield you from these unexpected costs by providing supplemental coverage above and beyond what you receive from your standard policies.

What does umbrella insurance cover?

This type of policy picks up where your other liability policies leave off, shielding you from debt caused by a legal judgment by providing additional settlement funds. Some costs that can fall under an umbrella policy include the following:

  • Bodily injury, including cases when you cause a car crash, your dog bites someone or a person falls in your home
  • Legal damages for libel, slander and other types of lawsuits, including both attorney fees and court costs
  • Property damage above and beyond what your home and auto insurance policies cover

Most umbrella insurance policies do not cover medical malpractice claims, intentional damage to another person’s property, workers’ compensation claims from your employees or damages caused by a business rather than an individual.

How much does umbrella insurance cost?

The Insurance Information Institute reports that umbrella insurance costs between $150 and $300 a year for $1 million in liability coverage, with lower costs for each additional $1 million in coverage. You can often save on a policy by bundling it with your other insurance plans. However, many insurance companies require you to carry at least $300,000 in homeowner’s liability and $250,000 in automotive liability before recommending an umbrella policy.

Do I need this policy?

Umbrella insurance may be right for you if:

  • You have significant personal assets
  • You own a business
  • You own a trampoline or swimming pool
  • You own investment property, including long-term and short-term rental homes
  • You own a dog
  • You engage in hazardous sports like surfing or skiing

Talk to an insurance provider to learn more about how an umbrella policy affects your liability. Proper insurance coverage protects your assets and your future earnings from the unexpected.