- Personal umbrella insurance
- Extra liability coverage that pays after your auto, home or boat liability limits are used up, and covers some claims those policies exclude, such as libel or slander. It protects against large judgments from serious accidents. It does not cover your own injuries or property.
- Total exposure
- The assets and future earnings a court judgment could reach. This calculator adds home and real estate equity, savings, taxable investments, other assets and the years of income you choose to protect.
- Underlying limits
- The liability limits on your auto and home policies, which pay first. Umbrella insurers normally require minimums, commonly around $250,000/$500,000 on auto and $300,000 on home, and the umbrella only pays above them. If you drop below the required limits, you may have to pay the gap yourself.
- $1 million layers
- Umbrella policies are usually sold in increments of $1 million. The recommendation rounds your uncovered exposure up to the next million, so $560,000 of uncovered exposure suggests a $1 million policy.
- Who should consider an umbrella
- Households whose net worth or income exceeds their auto and home liability limits, and those with higher risk: teen drivers, a pool or trampoline, dogs, rental properties, a boat, or a public profile. It is often inexpensive relative to the coverage it adds.
- Protected assets
- Federal law shields most employer retirement plans from creditors, and states protect IRAs and some home equity to different degrees. You can leave protected assets out of your exposure, but courts and state rules vary.
- Defense costs
- Umbrella policies generally pay legal defense costs for covered claims, often in addition to the policy limit. Legal fees alone in a serious lawsuit can be substantial.