Umbrella Insurance: What It Is and What It Covers

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Never heard of umbrella insurance? Well, you have come to the right place. A lot of you might be wondering what umbrella insurance is and how it works. Umbrella insurance is an insurance policy that offers protection beyond the limits set in your other insurance policies. It provides coverage for property damage, personal liability situations, injuries, and certain lawsuits.

Umbrella Insurance: What It Is and What It Covers

Sometimes life happens, and this is why you need to buy liability insurance, just in case you are in a tight situation. Buying liability insurance will avoid financial ruin for you, especially in a situation where there is a major injury or property damage on another person’s property. It can be seen as some sort of protection for your savings and other assets.

What is Umbrella Insurance?

Umbrella insurance is a type of liability insurance that provides additional coverage beyond the limits of your primary insurance policies, such as auto, homeowners, or renters insurance. It acts as an “umbrella” that extends over and above the basic liability coverage, offering an extra layer of financial protection.

The primary purpose of this insurance policy is to protect you from major claims and lawsuits. If you are found liable for an accident, injury, or property damage that exceeds the limits of your primary insurance, the umbrella policy kicks in to cover the remaining costs, up to the policy’s limit.

Who Needs Umbrella Insurance?

Everyone needs umbrella insurance, especially if you own a lot of assets like huge savings or property. It will provide security for your assets if you get sued by any chance. If you own a pool or trampoline where people can get hurt or you have young or new drivers in your household, you need to consider getting this insurance policy.

How Much Does Umbrella Insurance Cost?

Umbrella insurance does not cost so much money. It costs about $200 in premiums per year for $1 million of coverage. The cost varies based on how much coverage you purchase. You should not look at the price of purchasing an umbrella insurance policy. Instead, think about the many costs you will save yourself if your property injures another person.

How Does Umbrella Insurance Work?

It’s very easy. For instance, if your child brings a friend over to the house and your child’s friend gets injured while playing on your backyard trampoline, your homeowners insurance includes $100,000 in personal liability insurance coverage with a $5,000 deductible.

You have to pay the $5,000, and your insurance covers the remaining $95,000 in medical and legal claims. Now, without umbrella insurance, you will have to cover up the outstanding costs or even sell assets to raise the money.

What Does Umbrella Insurance Cover?

If you are ready to purchase an umbrella insurance policy, you need to know the coverage you will be getting. Here are the things that it covers:

Landlord Liability

This is specifically for homeowners who have tenants living under them. If you own a house and rent it out, you will be held responsible for any injuries that happen in that home. For instance, if a tenant trips and hits his or her head on the wall, if your landlord’s policy reaches its limit, your umbrella insurance policy will provide additional coverage.


It will provide coverage if you are involved in a lawsuit for slander, defamation of character, libel, and other personal attacks.

Bodily injury

It covers the cost of treating the person you caused any injury to, whether it is an auto accident or a home accident.

Property Damage

If, by any chance, you damage another person’s property, it can cover the damage if the damage exceeds your underlying policy limits. For instance, if your child is playing football and it hits a neighbor’s window, it will cover the cost of repairing the broken window if it exceeds your underlying policy limits.

What Does Umbrella Insurance not Cover?

Umbrella insurance does not cover a few things. So if you are purchasing it, you should consider the things that are not covered. Let us take a look at them below.

It Does not Cover Injuries Sustained by the Policyholder

Any injury sustained on any part of your body will not be covereed.

It Does not Cover Damage to Your Own Property

You will be responsible for the cost of any damage done to your property.

Business Losses

It is not responsible for any business loss that might have occurred. Business losses are not part of the coverage, so your insurance does not cover that.

Communicable Disease, Such as a Lawsuit Against you for Giving Someone an Infection

If, for instance, you infect a person with a disease or infection, it does not cover the expenses of treating the person.

Intentional Acts or Injuries Caused by the Policyholder

Any intentional act or injury caused by you is not covered by umbrella insurance. If you intentionally hurt yourself with a sharp object, it will not cover the cost of treating yourself.

Criminal Acts by You

It doesn’t cover any criminal act that was masterminded by you. You will have to face the law yourself when you get caught.


Umbrella insurance is wired to protect your assets and cover you when your homeowners or auto insurance policy is limited. They are also good options for people who are very rich and have a high net worth. It is also suitable for people who have additional risk factors.

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