An umbrella insurance policy protects against auto and home accidents, property damage, lawsuits, libel and slander. This policy will go into effect once your underlying policy coverage is exhausted. 

“Like all insurance, a good umbrella policy helps you sleep a bit better at night. Umbrella policies protect your assets and net worth if and when any large, unexpected, financially significant claims or lawsuits are made against you,” says Eric Young, senior economics instructor at Loyola Marymount University in Los Angeles.

Learn more about umbrella insurance, including how it works, what it covers, how much it costs and what you should consider before purchasing it.

Key Highlights
  • Umbrella insurance provides extra coverage when your needs extend beyond your underlying home and auto coverage limits.
  • An umbrella insurance policy covers lawsuits and personal liability situations, even when you’re at fault. It doesn’t cover business losses, contracts, intentional criminal acts, omissions or personal belongings.
  • Umbrella insurance policies average $200-380 annually for $1-5 million in coverage. The level of personal risk also determines costs.

What is umbrella insurance?

Umbrella insurance is additional protection for you, your assets and your savings. There are limitations to your home and auto insurance coverage policies, and while they will pay up to a certain amount, some situations may require additional funds. For example, an umbrella insurance policy can help cover expenses beyond your car insurance policy limitations if you’re sued after a car accident.

Most umbrella insurance companies will require that you have about $250,000 of auto liability insurance and a $300,000 homeowners liability policy before they’ll provide you with an additional $1 million in coverage.

Calculator: Do I need umbrella insurance?

How does umbrella insurance work?

An umbrella insurance policy typically kicks in when you’ve exhausted your liability coverage or are involved in a situation excluded from your standard coverage, such as false arrest, libel, slander or rental property liability coverage.

Tip iconExample:

To better understand how umbrella insurance works, consider this example:
Your 18-year-old son was driving your car to the store with his friend when he lost control and struck a tree. His friend sustained injuries during the accident, underwent two surgeries and spent three weeks in the hospital.

The total cost for damages and injuries is $400,000 – $100,000 more than the $300,000 bodily injury liability coverage on your teen’s insurance policy. You are now responsible for the remaining balance. However, if you had umbrella insurance, the additional costs would be paid through your umbrella liability policy.

Guide to the best umbrella insurance companies

What umbrella insurance covers

Unexpected expenses are a part of life. Purchasing a home, auto or renters insurance policy provides coverage when specific situations arise — but it doesn’t cover everything. This is where personal umbrella insurance could be a wise investment. 

“People should consider an umbrella insurance policy if they have a lot of assets — a net worth of $500,000 and up — a high future earning potential, and/or if their professional or personal activities subject them to a high chance of being sued,” Young says. “This last category could include those who earn income as landlords, serve on boards, coach or volunteer in the local community, have young drivers in the home, write product or business reviews online, drive a luxury vehicle, or otherwise demonstrate wealth and status.”

In general, umbrella insurance provides personal liability coverage for the following:

  • Injuries: Bodily injuries sustained by another person during an accident and medical costs, such as an at-fault auto accident, a guest falling in your home or a dog bite incident on your property.
  • Property damage: This includes damages to another person’s property or your own, such as high accident costs or those beyond your homeowners insurance coverage.
  • Lawsuits: These involve attorney fees and incidents, including wrongful eviction, libel, slander, false arrest or imprisonment, such as a student making false claims about a teacher online.

Overall, umbrella insurance protects from large liability claims or judgments when your other insurance policies’ limits have been met. However, umbrella insurance has some limitations. 

What is not covered by an umbrella policy

While your umbrella policy protects high-cost and personal liability situations, it does have some specific limitations. In general, it doesn’t cover personal damage to you, your car or your home, won’t meet the needs of your business incidents and won’t protect against a breach of contract. 

The following scenarios are examples of what your umbrella policy doesn’t cover:

  • Business losses: A personal umbrella policy doesn’t typically cover business-related liabilities. For example, while operating your home daycare, a child topples over in a high chair, striking their head on the tile floor and experiencing significant head trauma. The child’s parents sue you, but lawsuit protection is unavailable because you have a personal umbrella policy. However, you may have received a different outcome if you had coverage under a business umbrella policy. 
  • Contracts: An umbrella policy won’t protect you from a breach in oral or written contracts you’ve entered into. For example, he doesn’t finish the project after hiring and paying a contractor to complete a kitchen rebuild in your home, leaving your home damaged. He won’t return your calls or the remainder of your retainer. 
  • Intentional criminal acts or omissions: While lawsuits are typically covered under an umbrella policy if you intentionally commit a crime or withhold information, your policy will not cover you. For example, after arguing with your neighbor about a shared fence, you harass him daily and eventually damage his property out of anger. Your umbrella policy would not cover legal fees because of intentional actions. 
  • Personal belonging: One of the key benefits of personal umbrella insurance is its coverage of damage to other people’s belongings. Unfortunately, it doesn’t extend to damage to your belongings. 

It’s also important to note that umbrella insurance excludes anything from your primary home or auto liability insurance policy. 

Learn more: Is an umbrella policy a waste of money

Final thoughts: Umbrella insurance

You can purchase standalone umbrella insurance with a company other than your home and auto insurers. When shopping around for quotes with insurance agencies, inquire about purchasing a standalone umbrella policy and how it will work with your established policies. 

Resources & Methodology 


  1. Allstate. “How much does umbrella insurance cost?.” Accessed April 2023.
  2. Gallen Insurance. “10 actual claims on a personal umbrella policy.” Accessed April 2023.
  3. Geico. “Geico umbrella insurance.” Accessed June 2023.
  4. Insurance Information Institute. “Should I purchase an umbrella liability policy?” Accessed April April 2023.
  5. Insurance Information Institute. “What is an umbrella liability policy?” Accessed April 2023.
  6. Liberty Mutual. “Liberty Mutual umbrella insurance?” Accessed June 2023.
  7. Progressive. “Progressive umbrella insurance.” Accessed June 2023.
Laura Longero

Ask the Insurance Expert

Laura Longero

Executive Editor

Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

John McCormick

Ask the Insurance Expert

John McCormick

Editorial Director

John is the editorial director for, and Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.

Leslie Kasperowicz

Ask the Insurance Expert

Leslie Kasperowicz

Managing Editor

Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like and and managing content, now at

Nupur Gambhir

Ask the Insurance Expert

Nupur Gambhir

Managing Editor

Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.

Please Enter Valid Question. Min 50 to max 250 characters are allowed. Only (& ? , .) charcters are allowed.
Please Enter Valid Email.
Error: Security check failed
Thank You, Your message has been received. Our team of auto insurance experts typically answers questions within five working days. Note that due to the volume of questions we receive, not all may be answered. Due to technical error, please try again later.
Get instant quotes now !
Please enter valid zip
author image
Contributing Researcher

Katrina Raenell is a writer, editor and educator with 20 years of experience in content and communications for international organizations, nonprofits and start-ups. In her previous roles, she was a communications manager for study abroad, content project manager for higher education and finance websites, reported on arts and culture, and was a managing editor for an online health and wellness publication.