Everything You Need to Know About Umbrella Insurance
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Written byLindsay VanSomeren
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Lindsay VanSomeren is an insurance and personal finance writer who’s been writing for Compare.com since 2023. Her work has also appeared in publications such as FICO, Credit Karma, The Balance, and more. She enjoys helping people learn how to manage their money better so they can live the lives they envision for themselves.
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Edited byLequita Westbrooks
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Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
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How confident are you that you’d be able to handle the fallout from a potential lawsuit? After all, it’s easier than you might think to cause significant damage to someone without meaning to. When the unexpected happens, homeowners or auto insurance can help, but only up to the limits of the policy you’ve purchased.
Umbrella insurance can provide protection beyond your existing insurance policies for damage or injuries you’re responsible for. When you purchase an umbrella insurance policy, this additional coverage kicks in to cover liabilities your other policies can’t.
Coverage is generally affordable, and umbrella insurance can be a lifesaver if you have assets and savings you want to protect. We’ll cover what you need to know in the sections below.
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Umbrella Insurance and How It Works
Umbrella insurance works quite a bit differently than other insurance policies because it’s optional insurance you buy in addition to your other policies. In fact, insurers typically require you to purchase auto and homeowners or renters insurance with relatively high limits before you’re even eligible to buy umbrella insurance.
An umbrella policy covers you and family members in your household, but it may not cover a roommate with their own auto policy. It’s important to verify who’s covered with your insurer.
To see how it works, let’s look at an example. Let’s say your insurer, like most companies, requires you to purchase at least $250,000 in liability coverage on your auto policy before buying an umbrella insurance policy.
Say a family member spins out during a snowstorm and accidentally causes another driver to lose all of their worldly possessions while on a cross-country move — your auto insurance may reimburse them for up to $250,000.
But let’s say they also had a jewelry collection worth $500,000. Your umbrella coverage would kick in to cover the difference.
What Umbrella Insurance Does and Doesn’t Cover
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Umbrella coverage can protect you against some of the most expensive insurance claims you could face. That said, there are still limits you should be aware of so you can find other ways to protect yourself if necessary.
The table below highlights the types of things umbrella insurance does and doesn’t cover.
Umbrella Insurance Covers | Umbrella Insurance Doesn’t Cover |
|---|---|
| Libel and slander | Deliberate negligence |
| Your legal defense costs | Punitive damages in a lawsuit |
| Bodily injury that you or household members cause to others | Damages that your business causes |
| Property damage that you or household members cause to others | Damage to your property or your injuries |
How to Determine If You Need Umbrella Insurance
Umbrella insurance isn’t just for people with high net worths — if you have assets you want to protect or are at a greater risk of being sued, it might be worth it. For instance, if someone sues you for $1 million, a court can order you to sell some of your assets or even garnish future wages to pay a judgment against you.
To see if umbrella insurance is worth the extra cost, experts recommend adding up all your assets (potentially including your home, depending on state laws for exemptions) that could be at risk if someone sues you. If your assets exceed your auto or home policy limits, compare it to the policy limit you need to buy for an umbrella policy.
For example, if you have $500,000 in assets but only have $250,000 worth of liability coverage on your auto policy, you may want to consider buying an umbrella policy.
But you could opt for other types of extra protection in some cases. If you run a small business, for example, errors and omission insurance or general liability insurance might be a better choice. Putting assets in a trust can also work, although it’s best to consult a lawyer.
The Pros and Cons of Umbrella Insurance
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If you have the financial means to pay for higher coverage limits on your auto and homeowners policy, spending a few extra bucks on umbrella insurance is a no-brainer for many people. That said, it’s still important to compare the benefits of umbrella insurance to the drawbacks so you know exactly whether it’s a good fit for your situation.
Pros
Provides peace of mind
Coverage is generally affordable
Financial security if you get sued
Provides additional coverage for libel and slander
Cons
Coverage doesn’t apply to all liability cases
Doesn’t cover your injuries or your property
Requires significantly high limits on other insurance products
7 Auto Insurance Companies That Offer Umbrella Insurance
Umbrella insurance works pretty much the same regardless of which insurance company you choose. Since it’s often paired with auto insurance, we’ll cover seven of the best auto insurers offering umbrella liability policies.
Auto Insurance Company | Umbrella Coverage Limit |
|---|---|
| State Farm | $1,000,000 minimum |
| USAA | $1,000,000–$5,000,000 |
| Erie | $1,000,000 minimum |
| GEICO | $1,000,000 |
| Auto-Owners | $5,000,000 maximum |
| Progressive | $5,000,000 maximum |
| Amica | $1,000,000 |
State Farm
Umbrella coverage limit: $1 million minimum
Compare.com rating: 4.90 out of 5
State Farm is the largest insurer of passenger cars in the U.S., covering about 18% of all vehicles, according to the National Association of Insurance Commissioners (NAIC). It offers a wide variety of other insurance products as well, making it an easy one-stop shop for all your coverage needs.
USAA
Umbrella coverage limit: $1 million–$5 million
Compare.com rating: 4.91 out of 5
You’ll need to be a servicemember or connected in some way to the military to be eligible for coverage through this highly rated insurer. You’ll also need an auto insurance policy with USAA before you can purchase an umbrella policy. But any other policies you have (such as homeowners insurance) can be with other insurers.
Erie
Umbrella coverage limit: $1 million minimum
Compare.com rating: 4.75 out of 5
Erie Insurance is available in only 12 states in the eastern half of the country. But it has some of the highest customer satisfaction ratings in the industry and offers plenty of discounts and savings — including up to 25% off for bundling together multiple insurance policies.
GEICO
Umbrella coverage limit: $1 million
Compare.com rating: 4.65 out of 5
While GEICO’s customer service ratings aren’t as strong as the insurers discussed above, it has one important thing going for it if you’re concerned about large lawsuits: the highest AM Best rating for financial stability, A++. That means the company is financially stable and can pay out claims.
Auto-Owners
Umbrella coverage limit: $5 million maximum
Compare.com rating: 4.43 out of 5
Auto-Owners is another highly rated regional insurer that’s currently available only in about half of U.S. states. Older adults — or those without vehicles of their own — may qualify for special discounts on an umbrella policy that can help bring the cost down even further.
Progressive
Umbrella coverage limit: $5 million maximum
Compare.com rating: 4.73 out of 5
Progressive is available throughout the country and may be an especially good choice if you prefer a company with a strong digital presence. Progressive’s mobile app comes highly rated, making it easy to get help and manage your insurance anytime you need it.
Amica
Umbrella coverage limit: $1 million
Compare.com rating: 3.90 out of 5
Amica may be a good fit if you’re looking for a hassle-free experience. The insurance company ranked the highest for claims satisfaction in 2023 by J.D. Power. It also has an A+ (Superior) AM Best financial stability rating.
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How Much Coverage You Need Before You Can Purchase an Umbrella Policy
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Insurance companies require you to have a certain amount of coverage on your auto and homeowners (or renters) policy before you can buy umbrella insurance. In general, you’ll first need to have at least $250,000 in auto liability insurance and $300,000 in home insurance liability coverage.
But limits may vary by insurer, and some insurers require even higher coverage limits. For example, USAA requires $300,000 in auto liability coverage before you’re eligible to buy umbrella coverage. Check with your preferred insurance company to be sure.
How to Determine How Much Umbrella Coverage to Buy
Again, most financial experts recommend purchasing enough umbrella coverage to cover all your assets to protect yourself if someone files a lawsuit against you.
The biggest expense with buying umbrella insurance — ironically enough — probably isn’t the umbrella policy itself, but the higher auto and homeowners coverage limits you’ll first need to purchase.
Umbrella policies typically run between $150 and $300 per year for a basic $1 million policy, with each million-dollar increment after that costing less. Other factors that can affect your insurance cost include your specific insurer, how many homes you own, and if you have high-risk vehicles, like speedboats.
How to Find the Best Umbrella Insurance
Generally, you’ll choose your umbrella insurance company based on your existing insurer, since it’s an add-on product. For example, USAA won’t let you purchase an umbrella policy — even if you have acceptable coverage limits elsewhere — unless you have a USAA auto policy.
Since umbrella insurance makes up a small — but important — aspect of your overall insurance picture, it’s best to choose your insurance company primarily based on its auto and homeowner insurance offerings instead of shopping specifically for an umbrella policy. Here are some ways to do that:
Buy your insurance policies with the same company to limit coverage confusion and maximize your discount opportunities.
Gather insurance quotes from several companies every time your policy is up for renewal to find the best rates and coverage options.
Enroll in your insurer’s telematics program (if they have one) to get a nice discount and learn ways to improve your driving. This will help reduce your chances of getting into an accident and filing a claim, which leads to higher rates.
Umbrella Insurance FAQs
Umbrella insurance can be confusing, so here are some quick answers to help you out.
Is an umbrella policy worth it?
It depends. Umbrella insurance policies are worth it if you have significant assets valued higher than your current insurance policy liability limits. They don’t cost very much and can ensure you’re as protected as possible against lawsuits that can easily eat away the bulk of your wealth.
Do umbrella policies have deductibles?
No. Umbrella policies don’t have a deductible, but any underlying insurance you have — such as auto or homeowners insurance — typically do. You’ll need to pay that deductible for that specific policy to kick in, and once those limits are exhausted, an umbrella policy will automatically kick in to cover the rest.
Are liability coverage and umbrella insurance the same?
Yes. Umbrella insurance is just extra liability coverage that applies on top of your other policies. It may also cover some situations your other policies won’t, such as if someone sues you for libel or slander.
What’s the most that umbrella insurance will pay?
Most umbrella insurance policies offer coverage in $1 million increments, ranging from $1 million to $5 million total. If your policy offers a maximum of $5 million in coverage, that’s the limit of how much it’ll pay after the limits of your other policies are first exhausted.
Sources
Insurance Information Institute, “What is an umbrella liability policy?,” Accessed March 21, 2024.
Military Officers Association of America, “Do You Need an Umbrella Insurance Policy?,” Accessed March 21, 2024.
National Association of Insurance Commissioners, “What’s an Umbrella Policy?,” Accessed March 21, 2024.
Nolo, “Don't Sue Unless You Can Collect the Judgment,” Accessed March 21, 2024.
NW Insurance Council, “Umbrella Policy Coverage,” Accessed March 21, 2024.
National Association of Insurance Commissioners, “Property and Casualty Insurance Industry 2023 Top 25 Groups And Companies By Countrywide Premium,” Accessed March 21, 2024.
J.D. Power, “Auto Insurance Customer Satisfaction Plummets as Rates Continue to Surge, J.D. Power Finds,” Accessed March 21, 2024.
AM Best, “Rating Services,” Accessed March 21, 2024.
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Lindsay VanSomerenInsurance Writer
Lindsay VanSomeren is an insurance and personal finance writer who’s been writing for Compare.com since 2023. Her work has also appeared in publications such as FICO, Credit Karma, The Balance, and more. She enjoys helping people learn how to manage their money better so they can live the lives they envision for themselves.
Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
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