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Should You Have an Umbrella Policy?

As a personal injury law firm, we often get asked about insurance coverage and how it can help protect individuals and their families from unforeseen accidents and liabilities. One type of insurance policy that frequently comes up in these discussions is an umbrella policy. So, what exactly is umbrella coverage and how can it help you? In this article, we will explain what an umbrella policy is, how it functions, and the various considerations that should go into the decision of whether to purchase one.

What is an Umbrella Policy?

An umbrella policy is a type of personal liability insurance that provides extra coverage beyond the limits of your standard home, auto, or watercraft insurance policies. It is designed to protect your assets in the event of a major claim or lawsuit that exceeds the coverage provided by your primary insurance policies. Umbrella policies typically offer coverage in increments of $1 million, and they can help cover legal fees, settlements, or judgments that result from a covered event.

How Does an Umbrella Policy Function?

Umbrella policies come into play when the liability limits of your primary insurance policies have been exhausted. For example, if you are involved in a serious car accident and the damages exceed your auto insurance coverage, your umbrella policy would kick in to cover the remaining costs up to its own limit. This can help prevent you from having to pay out-of-pocket for expenses beyond your primary insurance policy limits, potentially saving you from financial ruin.

Considerations for Purchasing Umbrella Coverage

1. Assess your risk exposure: Before deciding to purchase an umbrella policy, evaluate your personal risk factors. Do you own a home, have a swimming pool, or participate in activities that could potentially result in injury to others? If so, you might have a higher risk of facing a liability claim, making an umbrella policy more valuable.

2. Evaluate your assets: The main purpose of an umbrella policy is to protect your assets from being seized in the event of a large liability claim. If you have significant assets, such as property, investments, or savings, an umbrella policy can help safeguard them from legal claims.

3. Consider the cost: Umbrella policies are generally affordable, with annual premiums typically ranging from $150 to $500 for $1 million in coverage. However, it's important to weigh the cost of the policy against the potential benefits and risks. If you have a low risk of facing a large liability claim, the cost of an umbrella policy might outweigh the benefits.

4. Analyze your existing coverage: Review your current insurance policies to determine whether you have adequate coverage for your needs. If you find gaps or limitations in your existing coverage, you might want to consider an umbrella policy to fill those gaps.

5. Future earnings: In some cases, a liability judgment can target not only your current assets but also your future earnings. If you have a high-income job or expect significant future earnings, an umbrella policy can help protect your future financial stability.


Deciding whether to purchase an umbrella policy is a personal choice that depends on your individual circumstances, risk factors, and financial goals. By carefully considering the points outlined above, you can make an informed decision about whether an umbrella policy is right for you.


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