Do One Thing: Buy an umbrella liability policy (time: under 30 min.)

Kate Ashford  |  12:39 PM, Monday, April 25, 2011

Imagine if someone hurt themselves on your property—and then sued you. Do you have enough insurance? An umbrella liability policy provides extra coverage above and beyond the limits on your auto and homeowners policies. Translation: If something really big happened and somebody took you to court, you’d be covered. Don’t worry—umbrella policies are cheap. Here’s how it works.

This is for you: If you have a substantial amount of assets (in excess of the limits of your auto and homeowners policies) or you’re a highly paid professional, such as a doctor, lawyer, or business owner. You’re also a good candidate if you’re exposed to liability risk. Examples: You host parties and serve alcohol, have a pool or trampoline, own certain aggressive dog breeds such as pit bulls or Rottweilers, have older or younger drivers in the family, or you own rental property.

What’s it cover? An umbrella policy covers lawsuit claims relating to any accidental injury or property damage caused by you or people in your household. Examples: Skiing or golfing accidents, dog attacks, a drowning in your pool, an injury to a passenger in your car, etc. Some policies cover cases where you are sued for something not related to your home or car, such as slander or liability relating to service on civic, charitable, or religious organizations.

Hands-on time: Less than half an hour

Total time: Usually less than one business day, depending on the company

Cost: Varies according to your location, claims history and credit rating. The average cost for $1 million in coverage is about $150 to $200 per year, and you’ll typically pay an additional 50 percent for every extra $1 million. There may also be surcharges for things like having a younger driver in the family.

What you’ll need:

• Your personal info (SSN, etc.)


• Typically, an auto and homeowners policy from the same company—many won’t offer you an umbrella policy unless you buy both coverages from them.


• Your current auto and homeowners policy declaration pages (which summarize your current coverage).
• An idea of the value of your total assets.

What to do:

1. Call your auto and homeowners insurance agent. (If you don’t have coverage with the same company for these, call each company individually to see if they’ll offer you an umbrella policy anyway. Many won’t. In that case, you’ll have to consider switching one of your coverages.)

2. Think about how much coverage you want. $1 million is typically the minimum amount you can buy (and often recommended by financial planners), but you can buy up to $5 million.

3. Your agent will make sure your current auto and homeowners policy liability limits are where they need to be. If not, you may have to raise them.

4. You can typically fill out a simple application over the phone with your agent.

5. The agent will check your claims history and credit rating in order to approve the policy and establish the premium.

6. Ta da! You’re covered! Go throw a pool party.

To learn more:
Umbrella Insurance Extends Your Coverage (Insure.com)
Liability Storm? Get an Umbrella (Bankrate.com)

Did you do it? Tell us what worked or share other tips in the comments below.

Who helped: Arnie Sandler, Allstate agent