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Average Cost of Umbrella Insurance

One of the most helpful yet poorly understood types of insurance. While umbrella insurance may seem as though it is simply extra personal liability insurance, an umbrella policy can be vitally important to making sure all of one’s assets are truly protected in the case of substantial liability. In this article, we walk you through the ins and outs of umbrella insurance.  To find out the cost of other types of insurance, you can check out our other articles!

How Much Does Umbrella Insurance Cost?

Umbrella insurance can range greatly based on the coverage limit. For example, with $1 million in liability coverage, the average cost is about $250 per year. More robust coverage, up to $10 million in liability coverage, an umbrella insurance policy can cost about $1,200 per year. The cost for umbrella coverage is generally inexpensive relative to the amount of coverage you receive, which often makes purchasing umbrella insurance a good value. 

Coverage LimitTotal CostMarginal Cost
$100k$100$100
$500k$150$50
$1M$300$150
$2M$500$200
$5M$1000$500
$10M+$1500+$500+
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What Influences the Cost of Umbrella Insurance? 

The cost of umbrella insurance is influenced by several different factors such as where you live. But more importantly, it is determined by how much coverage you need, which is often correlated to your total net worth.

Amount of Coverage You Need for a Personal Policy

The rule of thumb is you should have enough liability coverage to cover your net worth. If you are a high net worth individual, your general liability insurance and other types of insurance, like your auto policy, may not be enough to cover you in a catastrophic event. Your personal umbrella policy can provide that extra protection you need.

So for example, say you have a net worth of $1 million (total assets – total debts). Say you have $500,000 worth of liability from your primary insurance policies or from your general liability plan if you are a small business. That still leaves about $500,000 left to cover your total net worth. An umbrella policy would be an inexpensive way to bridge that gap and keep you extra protected.

Credit History

Your credit history as well as your entire family’s driving history will also directly affect the cost, with histories of default or accidents raising the cost. Lastly, your overall risk profile will affect the cost of the insurance. This means having variables in your life that may make a liability a higher risk, such as owning a dog or having a teenager in the house.

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What is Typically Covered by Umbrella Insurance? 

Umbrella insurance is a form of personal liability insurance that covers damages in excess of what is covered by homeowners and auto insurance. The reason why it’s called “umbrella” insurance is because it covers a wide range of potential personal liabilities and thus gives people a strong blanket of protection.

For example, it can cover as wide of liabilities such as the medical bills of someone your child had an automobile or the personal liability in damages if you are sued after your dog harms someone. 

How Can You Reduce Umbrella Insurance Premium Costs? 

Insurance agents will not typically sell umbrella insurance before the purchase of homeowner and auto insurance are completed. Agents will often attempt to have customers purchase the highest possible limits for their insurance before selling them umbrella insurance. Raising the limits of these policies can be far more expensive than purchasing additional umbrella insurance, so it would likely be best to purchase umbrella insurance from a different provider than your homeowners and auto insurance.

Some insurance providers provide discounts on premiums if insurance is bought bundled together to combat this incentive to purchase umbrella insurance elsewhere, Purchasers should attempt to find the right balance between discounts and paying more for a higher standard coverage limit.

When Do You Need Umbrella Insurance?  

It is highly recommended that those with a high net worth purchase umbrella insurance. No matter the person; freak events can and often happen that cause significant liability that exceeds your normal insurance coverage. Assets can become targets to pay for these liabilities and force people to see their savings drained in an instant without umbrella insurance. Umbrella insurance should always be bought when the value of your assets exceed your basic liability coverage. 

According to Scott W. Johnson of Marindependant Insurance Services says the following people should have an umbrella policy:

  • People that have children
  • People that have a net worth in excess of their liability coverage
  • People that own pools, dogs, trampolines, drones, other animals, etc
  • People that own rental properties
  • People that live an international life or travel internationally.
  • People that have other things that make them more likely to need more coverage.

Is Umbrella Insurance Worth It?

If you stand to lose a lot due to a freak accident, a personal umbrella insurance policy is probably worth it. Like we said, the cost is relatively small, but can save you thousands if not millions in the event of a serious accident that involves injury or property damage.

Where to Buy Umbrella Insurance

There are several websites that provide easy ways to purchase umbrella insurance. Due to the ease in comparing different quotes, we recommend using CoverWallet. CoverWallet provides explanations and comparison tools for finding the right price.

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