Do I need an umbrella policy?

You need an umbrella policy if your total assets exceed your car or home insurance policy limits or if you have a high risk of being sued. An umbrella policy is an optional form of liability insurance designed to supplement existing coverage, and it typically costs $150 to $200 annually for $1 million in coverage. As a result, households with a high net worth are the most likely to need umbrella coverage.

When You May Need an Umbrella Policy

• Your assets are greater than your home or car insurance policy limits.
• Your occupation puts you at high-risk for a lawsuit.
• You own a trampoline, hot tub, or swimming pool.
• You ski, hunt, surf, or participate in another hobby where you could injure someone else.
• You own property, especially rental or investment properties.
• You have a dog with a restricted breed or a bite history.
• You are a public figure.
• You own guns.
• You frequently host guests.

A common rule of thumb is that households should have an umbrella policy if they have $1 million or more in assets. Umbrella policies are also a good investment for people whose assets will likely increase considerably in the future, as liability settlements can sometimes result in wage garnishment. For example, medical students are often advised to purchase umbrella coverage to protect their future income.

To purchase an umbrella policy, you will usually need a car insurance policy with high liability limits. For instance, GEICO umbrella coverage requires at least $300,000 in bodily injury liability insurance and $100,000 in property damage liability coverage. 

For more information, check out WalletHub’s complete guide to umbrella insurance.