If you have never heard someone talk about a “Personal Umbrella Liability Policy,” then you need to read this article. 

First of all, the term umbrella is quite misleading, because like all insurance policies, it’s loaded with exclusions.  That doesn’t mean it’s a bad idea, it’s just a bad term.

Sometimes these policies are referred to as excess liability policies, which is a more descriptive word.

These policies are not just for rich people; virtually everybody needs one.  As you continue to read this article, you will see that judgments for your future earnings, garnishments at work, and financial ruin can easily impact more than wealthy people in America.

  • What if you are sued for $1,000,000?

  • What if your legal fees to defend yourself are $400,000?

Let’s look at some examples:

  • A 22 year-old is struck in the eye by an errant golf ball.

  • A professional dancer sustains permanent knee damage when knocked down by a fellow skiing partner.

  • A woman sustains severe disfiguring cuts when her leg is hit by the propeller of a boat.

  • A 16 year-old becomes a paraplegic after striking his head on the bottom of a swimming pool.

  • A five year-old suffers brain damage when a dinner bell at his grandfather’s home falls on him.

  • Your ten year-old starts a fire in his fort, which burns down the railroad trestle over a river.

  • Biting dogs, scratching cats, young neighbor children near swimming pools or trampolines…the list is endless.

What is a Personal Liability Umbrella Policy?

An umbrella policy will pick up where the liability coverage of other policies ends. For instance, most homeowners policies only provide a maximum of $500,000 for your personal liability limit.

Other policies have similar thresholds, and you simply can’t buy enough in these “primary” policies. The umbrella then provides another layer of protection.Many umbrella policies extend coverage for areas not normally covered by these other policies. Stuff like libel, slander, defamation of character, or invasion of privacy are a few examples.
It is absolutely mandatory that you explain all of your exposures to loss to the underwriter. Do you have a boat? Motorcycle? Snow mobile?

What’s not covered?

Like every insurance policy ever written, there are quite a few areas that are not covered in a standard personal liability umbrella policy.

  • All business activities

  • Aircraft

  • Large trucks

  • Professional liability

Non-Profit Organizations

This area is misunderstood by almost everybody. A personal liability umbrella policy does extend coverage while you serve on a board of directors for a non-profit organization. However, the personal liability umbrella policy only covers bodily injury and property damage claims.Most of your exposure while serving on a board of directors is for mistakes in judgment, such as improper direction of investments, possible violation of state statute, improper termination of employees, and a lot more. These types of things are more appropriately covered by a Directors & Officers liability policy taken out by the organization.


A personal liability umbrella policy is quite inexpensive, ranging in cost from $150 to $300 for the first $1,000,000.

Pricing varies widely based on what you have. If you have a large speed boat, the premium will be higher. If you have two teenaged drivers, that will also increase the personal liability umbrella premium, just like it increases your auto premiums.

In today’s litigious society, most consumers are now purchasing a $2,000,000 umbrella. This is peace of mind insurance, and you can buy as much as you can afford and/or are comfortable with.

Typical Umbrella Premium for a Consumer with One House and Two Cars
$1,000,000 $150
$2,000,000 $255
$3,000,000 $375
$4,000,000 $475
$5,000,000 $575

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