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What is an Umbrella Policy?

Judge's bench and gavel











How do you prepare for a lawsuit? Get a lawyer? Prepare a strong defense? Consider offering a settlement? While these are all reasonable steps to take, the most important one is the one you take today, long before you are ever faced with such a scenario. Purchasing a personal umbrella policy can provide you with the excess liability protection you need to shield yourself against a major loss. With it, you can easily withstand a million-dollar judgment or more. Without it, everything you have worked hard for could come crashing down in the blink of an eye.

Understanding Umbrella Insurance

Umbrella insurance is supplemental liability protection that kicks in when you have exhausted the limits of your homeowners or auto insurance. Most policies also provide added protections for things like slander, libel, false arrest, and damages you cause when traveling abroad. Since the coverage is secondary to the liability on your home and auto insurance, most carriers will require a minimum amount of coverage before issuing an umbrella policy.

These are typically:

  • $300,000 or $500,000 homeowners liability
  • $250,000/$500,000 auto bodily injury liability OR
  • $300,000 combined single limit (CSL)

You can purchase an umbrella policy from an independent agent here at Noah Insurance with limits ranging between $1 million and $5 million depending on your personal coverage needs. Policies start at around $200 or less per year for a $1 million policy and typically become increasingly affordable with each addition million added to the policy.

Calculating Your Risks

ACE Private Risk Services created a risk analysis designed to determine a person’s likelihood of being sued in today’s litigious culture. It incorporated many factors that could elevate your risk of being sued, including some surprising ones. For example, did you know that hosting the Thanksgiving dinner for your extended family can increase your risk of being sued? What about owning a rental property or high-performance sports car? Even being active on social media could contribute to your risk of being sued – especially if you or your teen publishes defamatory remarks.

Other things that might make you consider additional liability protection:

  • A long or dangerous commute
  • Having a teen driver
  • Owning a dog
  • Owning a swimming pool
  • Having a rental property with tenants

Once you identify some of your risks, you must determine how much you have at stake in a lawsuit. The obvious ones – your personal savings accounts and physical assets – are almost always at risk of liquidation and seizure in a lawsuit. But what about the less tangible assets – namely, your future wages and inheritance? Did you know a court can order garnishment of your wages and even an inheritance to satisfy a judgment? It is not enough to think only about today when purchasing liability protection; you have to think about the future, too.

Do not make the mistake of assuming your home and auto insurance liability are providing enough protection against a major liability. If you have not considered an umbrella as an added layer of coverage for your family, contact our team. We will be happy to answer any questions you may have and provide you with free quotes for the coverage you need.

When was the last time you calculated your liability risk exposure?