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Understanding Insurance

What Is Umbrella Insurance?

Umbrella coverage offers additional financial protection over and above the personal liability limits of other currently active insurance policies you have. Think of umbrella insurance as a powerful financial shield that can help protect your savings and future earnings under certain situations.

Whether you’re found at fault for a multi-vehicle crash on the interstate, or a guest slips and falls down the icy steps outside your home — the added coverage in an umbrella policy can kick in and help cover any remaining costs should the liability limits on your underlying car or homeowners max out.

And umbrella insurance coverage doesn’t stop there. Liability lawsuits can come in many forms and the hefty financial judgements that frequently accompany them can also drain your savings. Today, let’s take a closer look at umbrella insurance to help you understand how this coverage can help protect your financial dreams and everything you’ve worked so hard for.


    When it rains, an umbrella provides extra protection against the elements.

    When you have an expensive claim that exceeds your home, auto or renters liability limits, an umbrella policy provides additional financial protection against the unexpected.

    Thankfully, American Family Insurance can help you find the right umbrella insurance policy for your needs.

    What is umbrella insurance?

    A personal umbrella liability policy provides additional liability coverage over underlying insurance policies, such as a homeowners, personal auto, motorcycle, watercraft or renters policy.

    Here’s how it works.

    Imaging you have an auto policy with $250,000 in bodily injury liability coverage.

    But one day, you accidentally hit and seriously injure a bicyclist, resulting in $500,000 in medical expenses.

    Your auto policy would cover the first $250,000, but you’d need to pay the remaining $250,000 out of your own pocket.

    You might even have to use your retirement funds or sell personal property to cover those costs.

    Not so with umbrella insurance.

    After your auto policy limit is exhausted, your umbrella insurance kicks in and pays the rest.

    Umbrella insurance also offers financial protection for things not covered by your home, auto or renters policies.

    For example, if you leave a review online and are sued for libel, umbrella insurance can help pay for your legal defense!

    And even if you’re found guilty, your umbrella policy can help pay for the settlement, up to your policy limit, of course.

    That’s right, umbrella insurance covers libel, slander and false arrest, as well as defense or settlement costs if you’re found financially liable for someone else’s injury, even if the injury was caused by your child or dog!

    It’s extra liability protection that goes where you go, including internationally, where you might not be covered by your other policies.

    Plus, umbrella insurance can be a lot more affordable than you might think.

    For instance, you might even be able to get a policy for less than the cost of a weekly trip to the coffee shop or a monthly subscription to your favorite streaming service.

    And who is umbrella insurance for?


    You should consider an umbrella policy if you have assets you’d like to protect, like a car, property or retirement account.

    Own a home, condo or rental property. Have kids or a dog.

    Have a pool, trampoline, snowmobile, ATV or boat.

    Have hobbies that include hunting, traveling or coaching youth sports.

    Frequently host large gatherings or post on social media.

    Ready for more peace-of-mind protection?

    Contact your American Family agent today for your umbrella insurance quote.

How Does Umbrella Insurance Work?

An umbrella insurance policy helps protect your assets and future because it may cover additional costs incurred after your homeowners, auto or boat insurance policies limits are exhausted. An umbrella policy may also provide coverage for claims that may be excluded by other liability policies. Examples of these claims include false arrest, liability coverage on rental property you own, libel and slander.

Do You Need an Underlying Policy to Buy Umbrella Insurance?

Yes, you need an underlying policy to buy umbrella insurance. An underlying policy – for example, auto insurance – is needed because umbrella insurance is supplemental so you’ll need primary liability coverage of some sort already in place to qualify.

For example, an insurer might require an underlying auto or homeowners policy with a minimum amount of liability protection. Once that criteria is met, most insurance companies will offer additional umbrella policies that typically extend liability coverage to $1,000,000 or more.

Who Needs Umbrella Insurance?

This coverage can really help you out of an otherwise tough financial situation. It can protect you from wage garnishment where your future earnings could be docked. And if liability judgments levied against you exceed the limits of your homeowners, auto or other policies you have, you’ll be glad you’ve got this important coverage in place.

How Is Defamation, Slander and Libel Covered?

Coverage typically extends to others who are not named on your policy. That means you can’t sue yourself for defamation — or other persons listed in your policy for that matter. But if you made a slanderous comment on social media against someone, and a legal judgement finds you guilty, the settlement from that lawsuit could otherwise wipe out your savings and force you to relinquish other financial assets.

With umbrella coverage in place, your retirement funds, financial holdings and the hard-earned equity in your home can be better protected from legal liable settlements.

What Does Umbrella Insurance Cover?

Umbrella insurance covers such things as bodily injury, personal injury, property damage and landlord liability. Here are a few specific examples of how umbrella insurance can help protect your family and your assets.

You or a family member accidentally injure someone

Suppose your dog darts out the front door and jumps in front of a cyclist, resulting in a multi-vehicle crash with serious injuries. After your homeowners liability coverage pays out to its limit, your umbrella insurance will then kick in to help cover expensive repairs, costly medical bills and other covered expenses.

As a board member, you’re found liable for a decision you made

Although the terms of your service can impact liability, volunteer board members may be able to use their personal umbrella coverage to help protect their savings, if found liable in a court of law. Be sure to review your liability policy with your agent to understand how and when your coverage can help.

Your spouse hits the gas instead of the brakes

While your partner is pulling into a parking spot, their foot slips off the brakes and onto the gas pedal. The car then plunges into a storefront causing serious property damage and injuring three people. After your auto coverage limit is met, the umbrella policy can then help to pay for the rest of the damages and resulting hospital bills — up to the umbrella policy’s limit.

Minors access your liquor cabinet

Suppose you’re away for the weekend and you forget to lock your liquor cabinet on the way out. An underage guest then has several drinks and on their drive home, crashes their vehicle later that evening. This results in a totaled car and extensive injuries to the driver and others involved in the accident.

You injure someone in an ATV collision

While out on the ATV trail with friends, you misjudge a curve and collide with another ATV. You’re found liable and now need to pay out thousands more than your ATV’s liability limit provides.

You strike another boat at high speed 

Accidents on the water can happen quickly and costs for damages can add up when others require immediate medical attention. After the liability limits on your watercraft coverage are met, your umbrella insurance can help to pay for repairs and long-term health expenses to others.

Other Coverage Examples

Everyone can benefit from the protection of an umbrella policy. You’ll find the extra protection that umbrella insurance coverage offers is key, if you:

  • Own or rent a home or condo
  • Have a dog
  • Have significant savings or financial assets
  • Have kids living at home
  • Coach your kids’ sports team
  • Travel abroad
  • Own recreational vehicles like an RV, boat, wave runner or ATV
  • Own rental properties
  • Have a pool or trampoline
  • Volunteer on a board

What’s Not Covered with Umbrella Insurance?

Liability coverage helps you cover the financial responsibilities related to issues that others experience when you’re found legally at-fault. But umbrella insurance won’t cover damage you do to your own property or liabilities related to your profession or business.

Most umbrella policies typically extend coverage on exposures — or covered events — that are identified in a given underlying policy. You can also purchase an endorsement to your umbrella, adding protection to uninsured and underinsured coverage on your underlying vehicle policy. If you’ve got coverage questions, be sure to talk to your agent about how your specific umbrella policy works.

How Much Does Umbrella Insurance Cost?

Umbrella coverage might cost you as little as $150  $300 per year, or around $15 – $30 per month, with American Family Insurance. And for that, you’ll typically get around $1,000,000 in coverage above your base policy’s limit. While costs will vary by region and other underwriting factors, it's a small price to pay for real peace of mind.

If you feel more protection is needed, additional umbrella coverage is available in other increments.

Get the Umbrella Coverage You Need Today

With so much on the line, having the right umbrella insurance coverage in place can really help to protect your financial future. As more and more households use social media on a daily basis, and purchasing recreational vehicles, the need for a strong umbrella policy has never been greater.

Be sure to reach out to your American Family Insurance agent and request a quote for this important coverage. You’ll find more peace of mind knowing you’ve done what you can to protect everything you've worked so hard for.

This article is for informational purposes only and includes information widely available through different sources.

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Related Topics: Bundled Insurance , Insurance Needs , Home Insurance , Renters