Why Do I Need a Personal Umbrella Policy?


A personal umbrella policy, also known as excess liability or personal liability insurance, is a smart investment for anyone looking to protect their assets from significant claims or lawsuits. This type of policy provides additional liability coverage beyond what standard home or auto insurance policies offer, which often have coverage limits. Here’s why a personal umbrella policy can be an important addition to your insurance portfolio:

Coverage Beyond Standard Policies

Umbrella policies extend coverage in various situations, including:

  • Injuries and Property Damage: Protects against incidents caused by you while driving, on your property, or due to hazards at home like trampolines or swimming pools.
  • Personal Liability: Covers claims for libel, slander, defamation, false arrest, or invasion of privacy.
  • Out-of-Pocket Expenses: Helps with large medical bills or repair costs that you might be responsible for paying.

Key Benefits of Umbrella Insurance

  • Covers Additional Costs: If your standard insurance policy doesn’t cover the full amount of a claim, umbrella insurance can bridge the gap. For instance, if you’re sued for $500,000 in lost earnings and your car insurance only covers $300,000, your umbrella policy could cover the remaining $200,000.
  • Protects Your Assets: Shields your assets from potential legal and financial threats, ensuring your financial security.
  • Covers Excluded Claims: Umbrella insurance can cover claims excluded by other liability policies, such as false arrest, libel, slander, and liability coverage on rental units.
  • Relatively Inexpensive: For the peace of mind and financial protection it offers, umbrella insurance is often affordable. Typically, $1 million in coverage costs between $200 and $500 per year.

How Does Umbrella Insurance Work?

Umbrella insurance fills the gap between your liability coverage and the remaining costs associated with a claim. For example, if your child’s friend is injured on your trampoline, your homeowner’s insurance may cover up to $100,000 in personal liability. If additional claims amount to $60,000 beyond this coverage, an umbrella policy would cover these costs, preventing you from having to sell assets to pay the difference.

Who Needs Umbrella Insurance?

While standard insurance provides some protection, an umbrella policy is beneficial for those with:

  • Rental property
  • High net worth
  • Roles as youth sports coaches or nonprofit volunteers
  • Regular home entertaining
  • Participation in extreme sports or dangerous hobbies
  • Public or social media presence
  • Swimming pools or trampolines at home
  • Dogs or large/exotic animals

How Much Umbrella Insurance Do I Need?

To determine your coverage needs, add up the total value of your assets, including jewelry, antiques, art, retirement accounts, investments, vehicles, and savings. An insurance agent can then advise you on an appropriate coverage amount, which typically ranges from $1 million to $10 million. Keep in mind, the assets at risk in a lawsuit can vary.

Investing in a personal umbrella policy is a proactive step to safeguard your financial future. By providing additional liability coverage, it ensures that you and your assets are protected against unexpected and potentially devastating claims or lawsuits.

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Allied Insurance Managers's Bio

Headquartered in Rochester Hills, Mich., Allied Insurance Managers is one of the largest, privately-owned, independent insurance agencies in Michigan.