What is Umbrella Insurance?

Umbrella insurance is a type of insurance designed to make sure you’re protected in the event your purchased home, boat or auto policy doesn’t cover the full amount you need. This protection can be applied to damages, medical bills and lawyer fees if you’re sued for more money than your standard policy will pay out.

Read on for more information about umbrella coverage and how it may be right for you.

How does umbrella insurance work?

Basically, umbrella insurance will take care of the rest if you find yourself in a lawsuit or on the hook for a higher amount of money than your policy will payout.

An umbrella insurance policy may also cover types of lawsuits that a standard personal liability policy won’t cover, such as libel or slander. The coverage will also extend to all members of the household — though you’ll want to look into what your specific policy defines as a household member.

Let’s pretend a houseguest slips and falls down the stairs and ends up with injuries because your handrail was broken. After the dust has settled, you end up being served a lawsuit to pay for their medical bills and other damages like loss of income because they can’t work for a few months. All in all, you're liable for $500,000 in damages.

If you only carry $300,000 in liability damage, you’d have to pay that remaining $200,000 out of pocket. Umbrella coverage would apply in this situation and cover that remaining cost.

Is umbrella insurance the same as excess liability insurance?

Though umbrella insurance and excess liability fall under the same, well, umbrella, there are a few key differences between the two. Both are liability policies that extend the limits of your standard policy and increase coverage amounts.

The differences include the nature and logistics of that coverage. Excess liability coverage provides a dollar amount extension to one of your underlying policies — so, if you added excess liability to your home insurance, you could only apply it to home-related scenarios.

On the other hand, Umbrella insurance can be applied to multiple policies, providing additional coverage to everything from home to auto incidents. Umbrella insurance may also include coverage against lawsuits that aren’t typically covered by a standard policy and aren’t covered by excess liability, like libel and slander.

What is Covered by Umbrella Insurance?
Covered:	Not covered:
Bodily harm	Intentional acts
Property damage	Business losses
Libel	Personal belongings
Slander	Criminal offenses
Landlord liability	Your own home

What does umbrella insurance cover

An umbrella policy will usually cover bodily injury, personal injury, property damage and landlord liability. People who are at higher risk of accidents because they rent properties to tenants, own a dog, have kids or are party to any other risk factors can benefit from an umbrella insurance policy because it will cover accidents related to these types of things.

If you’re a person with a higher risk of being sued, contact Hippo to better understand how umbrella insurance could benefit you. Umbrella policies vary by company, and some have inclusions or exclusions that could impact your coverage amounts. To ensure you have coverage for what you really need, discussing options with a qualified insurance provider could be helpful.

Examples of situations covered by umbrella insurance

You might not think that you’ll ever find yourself in a situation that requires additional liability insurance, but problems like these arise more often than you might think. Here are a few conditions in which umbrella insurance could have your back:

• Your dog attacks a houseguest, and they sue you for the cost of their medical bills.
• Your child has a house party and someone slips and falls, causing their family to sue you for their medical treatment.
• You get into a physical fight with your neighbor and end up getting sued.
• A tenant at a property you manage sues you for wrongful entry into the home.
• A house fire starts in your rental property because of equipment breakdown and negligence, and the tenant sues you for damages.

See how common these incidents can be? And that’s just the tip of the iceberg. Umbrella insurance acts as a safeguard for anyone who ends up getting sued for more than their insurance will cover.

What doesn’t umbrella insurance cover?

To put it simply, umbrella insurance won’t cover your own costs. Umbrella insurance is meant to help you if you’re sued for damages and found at fault, not if you destroy your own belongings or property.

Other times an umbrella insurance policy won’t cover you include:

• Business losses or malpractice, including for home-based businesses
• Criminal actions
• Written or oral contracts
• Liability related to war or other armed conflicts
• Intentional damage

Umbrella insurance also won’t help cover things like dwelling, structure or weather-related accidents. So if a windstorm damages your property, someone burglarizes your home or a wildfire burns through your neighborhood, that will be a job for other types of coverage.

Do you need umbrella insurance?

Umbrella insurance isn’t required, but some people might choose to invest in it if there’s any likelihood that they’ll be sued. This type of coverage could be beneficial for landlords, as it will make sure you won’t find yourself in hot water if a tenant causes damages or has cause to sue you.

This type of insurance could also be a good investment for anyone who is at a higher risk of being sued in general. This could mean landlords, anyone who employs household staff, people with backyard fixtures like playgrounds, pools or hot tubs, dog owners and people who frequently entertain.

It might also be worth getting this type of coverage if you have assets worth a lot of money, like cars, houses or other belongings. In the event you’re sued, you don’t want to lose these items.

How much does umbrella insurance cost?

The price of an umbrella insurance policy will vary based on where you live, what your insurance provider can offer and how much of a risk you are to insure. In general, the Insurance Information Institute (III) estimates that a $1 million umbrella policy will cost about $150 to $300 per year. The next million will cost about an additional $75, then about $50 for each one after.

To qualify for coverage, you’ll also have to meet specific requirements on your standard policy, as this policy must run out before you can begin using umbrella coverage. On average, the III estimates you’ll need $300,000 in coverage on your home insurance personal liability policy.

If home insurance teaches us anything, it’s to expect the unexpected and prepare for it. Umbrella insurance is another way to do just that. Though getting sued isn’t typically on anyone’s to-do list, umbrella insurance can help shield you from the storm. Explore your umbrella and home insurance options by contacting Hippo today.