Umbrella Insurance Explained: Extra Protection for Your Assets

What is Umbrella Insurance?

Umbrella insurance provides additional liability coverage beyond the limits of your auto, home, and other policies. It "umbrellas" over your existing coverage, providing extra protection.

How Umbrella Insurance Works

Coverage Activation

Your umbrella policy kicks in when:

1. Your underlying policy (auto, home) reaches its limit
2. You face a covered claim not included in underlying policies

Example Scenario

You're found liable for a car accident with $400,000 in damages:

• Your auto policy pays its $300,000 limit
• Your umbrella policy pays the remaining $100,000

Without umbrella coverage, you'd owe $100,000 personally.

What Umbrella Insurance Typically Covers

Extended Liability Protection

• Auto accident liability beyond your policy limits
• Home liability claims exceeding your coverage
• Incidents away from home (dog bites at a park, injury at someone else's property)

Additional Coverage Areas

Many umbrella policies also cover:

• Libel and slander
• False arrest or detention
• Malicious prosecution
• Mental anguish and shock

What It Doesn't Cover

• Your own injuries
• Your own property damage
• Business activities
• Intentional acts
• Contractual liabilities

Who Should Consider Umbrella Insurance?

High Net Worth Individuals

More assets mean more to protect. If you have significant savings, investments, or home equity, you're a target for larger lawsuits.

Risk Factors

Consider umbrella coverage if you:

• Own a home with a pool or trampoline
• Have teenage drivers
• Own dogs (especially certain breeds)
• Have frequent visitors or guests
• Serve on boards or committees
• Own rental property
• Have domestic employees

Income Considerations

Future earnings can be garnished in lawsuits. Even if your current assets are modest, protecting future income is important.

Coverage Amounts

Umbrella policies typically offer:

• $1 million (minimum)
• $2 million
• $5 million
• $10 million or more

Determining Coverage

Consider:

• Total assets and investments
• Future earning potential
• Risk exposure
• Cost (umbrella insurance is usually affordable)

Requirements

Most insurers require minimum underlying coverage:

• Auto: Typically 250/500/100 or higher - see Minnesota auto insurance requirements
• Home: Typically $300,000+ liability - see Minnesota homeowners insurance guide

Cost Considerations

Umbrella insurance is generally affordable:

• $1 million policy: Often $150-$400/year
• Additional millions: Usually $50-$100 each

Next Steps

1. Review your current liability limits
2. Assess your asset exposure
3. Consider your risk factors
4. Discuss options with your insurance professional

For Minnesota-specific guidance, see umbrella insurance in Minnesota: who needs it and how much. Also consider reviewing your life insurance for complete protection.