Keep Your Umbrella Handy

Keep Your Umbrella Handy

November 10, 2022
Share |

Personal injury claims - from auto accidents and slip and falls to dog bites - are filed every day. In fact, over 400,000 personal injury claims are filed each year in the United States.1

Individuals with high net worth, or even those who are perceived to be wealthy, may be more at risk of being sued. What can you do to put an extra layer of protection between your assets and a potential lawsuit? 

Umbrella liability insurance provides coverage over and above existing automobile and homeowner insurance limits.  

For example, imagine your teenage son borrows your car and gets in an accident, seriously injuring the other driver. The accident results in a lawsuit and a $1 million judgment against you. If your car insurance policy has a liability limit of $500,000, that much should be covered. If you have additional umbrella liability coverage, your policy can be designed to kick in and cover the rest. Without umbrella coverage, you may be responsible for paying out of pocket for the other $500,000, which could mean liquidating assets, losing the equity in your home, or even having your wages garnished.

Read on for answers to all your umbrella liability insurance questions.

Do I Need an Umbrella Policy?

Deciding whether liability coverage is right for you may be a question of lifestyle. You might consider buying a policy if you:

  • Drive a lot of miles or have teenage drivers
  • Entertain frequently and serve your guests alcohol
  • Have large animals like horses or a dog, especially if the breed is known to be aggressive
  • Own jet skis, a boat, pool, trampoline, motorcycles, or snowmobiles
  • Operate a business out of your home, or employ household staff
  • Have a high public profile and give interviews that may be published
  • Live in a manner that gives the appearance of wealth

Even if you don't yet have a tent in the millionaire camp, you may want to consider the benefits of liability insurance. You don't have to be a millionaire to be sued for a million dollars. Anyone who is carefully building a financial portfolio may want to limit their exposure to risk. 

What Does Umbrella Insurance Cover?

Not only does an umbrella policy provide funds beyond the limits of your home and auto policies, it can provide liability coverage for problems such as:

  • Bodily injury to others
  • Property damage
  • The legal costs to defend you in lawsuits related to bodily injury or property damage
  • Lawsuits not covered by other insurances, such as defamation of character, libel, or slander
  • Incidents that happen outside the U.S.
  • Incidents that involve household members such as your spouse or children

As one could probably expect, your umbrella policy would not cover criminal acts, intentional harm done to others, or business losses.2

How Much Coverage Do I Need?

When determining the right amount of coverage for you, consider your net worth. An umbrella policy should at least cover the value of your assets, as this is generally what you stand to lose in a lawsuit.2

How Much Does Umbrella Insurance Cost?

Umbrella liability can be a fairly inexpensive way to help shelter current assets and future income from the unexpected. Generally speaking, it is sold in increments of $1 million and on average costs about $383 per year.2

When getting an umbrella policy quote, your insurer will likely base the rate on factors such as:

  • Where you live
  • Your credit history
  • Your driving record
  • Your risk of filing an umbrella insurance claim


If you are uncertain on the next steps to take or want to discuss your insurance coverage, remember GTS Financial is only a call away. While we do not sell insurance, we are always happy to connect you with trustworthy resources for all your financial planning needs.




Footnotes and Sources

1. RMDlaw, February 2022

2. Forbes.com, October 5, 2022