We are regularly asked by our estate planning clients for thoughts on insurance which may minimize exposure of the family nest egg to loss.
We are commonly asked by our personal injury clients about all sources of insurance which may be recoverable against a negligent driver.
The answer to both questions may be umbrella insurance.
What is Umbrella Insurance?
Umbrella insurance is a type of insurance which provides additional protection in the event of an insurable loss. In general, it does this in two ways: 1) by providing excess coverage over existing insurance policies and 2) by providing coverage for losses that may not be covered by your other insurance policies.
If a client is injured in your home or if you are at-fault in a particularly bad automobile accident, umbrella insurance may extend the liability coverage of your home or auto insurance policy. An umbrella insurance policy may provide more funds available to settle your case. If more funds are available to settle your case, the risk of exposure of your personal assets is lower.
What Types of Loss Might Umbrella Insurance Cover?
The key word is “umbrella”. Unlike an auto insurance policy or a homeowners insurance policy which has narrower coverage, an umbrella insurance policy often provides protection against a broad scope of risk.
Injury at your home (either your primary residence or a home you rent), injury on the road, injury to another’s reputation or your reputation (defamation), injury caused or sustained on vacation, injury caused by your pets, and injury caused by your immediate family members can all be covered by umbrella insurance.
But will such incidents be covered? Here is where the fine language of your insurance contract will be important, particularly the “insuring agreement” and “exclusions” sections of your policy.
What Types of Loss Might Umbrella Insurance Not Cover
Again, it is critical to read the “insuring agreement” and “exclusions” sections of your policy.
Generally speaking, umbrella insurance will not cover liability for intentional or reckless actions, criminal actions, or workplace or professional misconduct.
Additionally, umbrella insurance is not likely to increase your coverage if you are the victim of an accident and the at-fault party has insufficient coverage. For this type of coverage, you should be sure you have underinsured motorist coverage or enhanced uninsured motorist coverage.
Is Umbrella Insurance Expensive?
Umbrella insurance tends to be among the less costly types of insurance, especially when purchased from whomever already provides your home or auto insurance.
According to a February 2025 article in Forbes Magazine, the average annual cost of a $1 Million umbrella policy for a family with one home, two cars, and two drivers, was $383.00. Even if you increase the number of homes, cars, and/or drivers, the cost of umbrella insurance is far from prohibitive.
Who Should I Talk to About Umbrella Insurance?
If you have a relationship with a financial advisor or insurance professional, that’s the first person to talk to. They will be familiar with your risk, your needs, and the different carriers. If you don’t have a relationship with a financial advisor or insurance professional, you can easily shop around yourself. Start with your auto or home insurance carrier.
Jeremy Rachlin chairs the estate and trust practice group at Bulman Dunie and he can be reached at jrachlin@bulmandunie.com or (301) 656-1177 x305. Dan Shaivitz chairs the personal injury practice group at Bulman Dunie and he can be reached at dshaivitz@bulmandunie.com or (301) 656-1177 x304. Insurance coverage is an every day part of their discussions with their clients.
