Umbrella insurance: Advantages & disadvantages

Umbrella insurance, sometimes called personal liability insurance, offers coverage beyond the limits of your other policies. It can help cover the financial gaps and protect your savings and assets in the event you’re liable for damages.

Umbrella insurance is not required, but many choose to purchase a policy for greater peace of mind in answering some of life’s “what if” questions. There are key advantages to this type of coverage, but there may also be downsides.

To help you understand umbrella insurance more clearly, here is a breakdown of some major pros and cons:

Advantages of umbrella insurance

Umbrella insurance can help you avoid major financial loss. Some major advantages include:

• If you reach the limit on your home or auto insurance, umbrella insurance can help cover the remainder.
• Umbrella coverage includes incidents and situations that other policies might not (like being sued for libel or slander).
• Coverage limits are high, usually starting at $1 million.
• Most umbrella coverage applies anywhere in the world, keeping you protected while you travel.
• Umbrella insurance might cover expensive rental items you might not have other insurance for, e.g., boats.

Disadvantages of umbrella insurance

Umbrella insurance provides extra liability coverage and legal defense in a variety of situations. However, there are some downsides and major exceptions to consider, including:

• You cannot buy umbrella insurance unless you’ve already purchased a qualifying minimum amount of auto or home insurance first.
• Umbrella insurance does not cover the cost of your own medical bills if you’re injured.
• Damage to your own personal property is not covered.

An umbrella insurance policy can keep you and your assets safe. While you’ll hopefully never need to file a claim, the more you know about what umbrella coverage provides, the better insurance decisions you’ll be able to make.