How umbrella coverage stacks
If you cause a serious car accident with $500,000 in damages and your auto policy carries $250,000 in liability limits, your auto insurer pays its $250,000 and the umbrella picks up the remaining $250,000. Most umbrella policies require certain minimum underlying limits — often 250/500/250 on auto and $300,000 on homeowners — before they will issue coverage.
What is and is not covered
Umbrella policies cover bodily injury, property damage, and certain personal liability situations such as libel and slander. They do not cover your own injuries, business activities, or intentional acts.
Who should consider one
If you own a home, have significant savings or future earnings, drive teenage drivers, own a swimming pool or trampoline, or rent out property, an umbrella policy is one of the most cost-effective protections you can buy. A $1 million umbrella commonly costs $200 to $400 a year.
Key takeaways
- Umbrella coverage extends home and auto liability limits.
- Underlying policies must usually meet minimum liability limits first.
- Coverage costs $200 to $400 a year per million in most cases.
- Especially valuable for homeowners, parents of teen drivers, and landlords.
This article is for general educational purposes and is not legal, financial, or insurance advice. Consult a licensed professional for decisions specific to your situation.