Do I Need A Personal Umbrella Insurance Policy?

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GEICO sent me an email the other day pimping their Personal Umbrella Insurance Policy (yes, the email was spammy and yes, I read it because I actually like Geico quite a bit) that started with these three questions:

  • Do you own your home? Yes.
  • Do you own any significant assets in addition to your home? Yes, a couple things.
  • Have you built an investment portfolio or a retirement savings account? Yes to both.

They said that if I answered ‘yes’ to any of those questions, I need a personal umbrella insurance policy… I answered yes to all of them! So do I need a personal umbrella policy?

The purpose of the personal umbrella liability policy is that it’s a catch-all insurance policy if I ever get sued for something, I lose, and my first line of defense, such as the homeowners or automobile insurance policies I have, get breached (ie. I’m sued for a lot of money). It’s essentially an extra layer of protection between the lawyers and my assets.

So let’s say I get into an accident, am sued, and found liable for half a million dollars. I hope and that never ever happens but if it does, my auto insurance will pay out the first $300,000 and then I’m responsible for the remaining $200,000 which basically means my house. Now if I added a $1M personal umbrella insurance policy then the $200,000 would be covered by that insurance too. The umbrella insurance policy also happens to cover when I get sued for something without an underlying insurance protector, such as if I slander someone and they decide they want money so they can feel better about it.

The average price for a $1M personal umbrella liability policy is anywhere between $150-$300 with the next million costing around $75, and each million after that for a mere $50 a pop. It’s about on par with renter’s insurance and if you do the math, anywhere between $12.50 to $25 a month. To be eligible, especially at those prices, the insurer will want you to have auto and homeowner’s/renter’s insurance that will cover you to a minimum amount (around $250k for auto, $300k for homeowner’s/renter’s) because they are the second layer of defense.

Right now, I honestly don’t think it’s really necessary but it’s something to consider for the future.

{ 19 comments, please add your thoughts now! }

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19 Responses to “Do I Need A Personal Umbrella Insurance Policy?”

  1. monkeyjoe says:

    “Right now, I honestly don’t think it’s really necessary but it’s something to consider for the future.” Do not be a fool! All it takes is one bad accident on a slippery day for your wages to be garnished for the rest of your life. Eat out one less time per month and you can protect yourself from most lawsuits. Also realize that the umbrella policy insuring company will put forth many resources to guarantee that the suer does not get their money, protecting even more from someone winning the case against you.

  2. FMF says:

    I’m with the monkey! For $150 a year, you can get a lot of protection.

  3. Eric says:

    I’m with the monkey as well. Accidents happen. You can spend a lot of time and effort saving and planning for retirement and all it takes is some silly accident to wipe you out. Please take some time to learn more about umbrella insurance. Here are a few articles to get you started;

  4. FMF says:

    BTW, I just paid mine this weekend — a bit over $150. It can be tax deductible too if you have a side business/extra income.

  5. jim says:

    Do you deduct as part of your home office?

  6. ProHabber says:

    It is not a bad idea at all if you have any significant assets. The premiums are farily inexpensive because the risk to the insurance company is fairly low, but it is a great safety net if something goes very wrong. If you are really interested in protecting your “stuff” then you could get into some trusts. The details are very advanced, but as a budding personal finance guru, you should probably start learning about them.

  7. We carry a significant umbrella policy. It’s just part of the price of protecting yourself.

  8. AP says:

    I am thinking of going with the Umbrella Policy. Do you think Gieco is good for it. I have my Car Insurance with them and I like them for their service.

    How do we learn more about trsust – ProHabber?

  9. AP says:

    I actually had a question.

    Whats the difference between the Umbrella Policy / and Trusts. Are Trusts for VERY WEALTHY Individuals?

    If a 1 million dollar policy covers my assests then is a trust necessary?

  10. ProHabber says:

    I just checked out Geico’s website and they do offer an umbrella policy. I can’t say anything else about them because I have never used them for anything. With insurance, you just want to make sure that in the event that you need to make a claim, the company will be there for you.

    The umbrella insurance policy is just that – an insurance policy. It will cover you in the event that you need to make a claim. A trust is used to hide assets from other people and they are also used for estate planning. The goal is to protect what you have and trusts do not have to be for the very wealthy. They will cost you some money to have set up through a lawyer, but they will protect any amount of assets that you want to put into them.

    The single best way to learn about trusts and what they can do for you is to talk with a lawyer that specializes in estate planning.

  11. Rosa says:

    I am doing a project in school about insurance. I wanted to learn more about the umbrella insurance policy. Do you know if all the insurance companies carry this policy? If not which ones do have it?

  12. Advocate for the Disbled and All Misourians says:

    So the question I have is what if I don’t own a car, use public transportation (and transit for the disabled at that–I can no longer drive), and thus don’t have auto insurance? Is my umbrella rate higher?

    Gonna find out on Monday what my rate would be.

    For those of you interested, the link to GEICO’a Umbrella Policy page (they don’t list it as an option on the home page–you have to type “umbrella” in the search box) is;

    > A D A M <
    Advocate for the Disabled and All Missourians

  13. Marilyn J says:

    My premium notice is sitting in front of me right now and it pisses me off every year when I have to pay for that coverage.

    • Advocate for the Disbled and All Misourians says:

      Marilyn J–

      Do you have all of the things I don’t have? I don’t have a car and I rent an apartment. I do have health insurance, not through them.

      I never got around to calling GEICO as I’ve been recovering from illness (twice–once with a fancy hospital stay) in the last month.

      I’m trying to find out how I can get JUST an umbrella policy. If anyone knows, post it up. Thanks.

      > A D A M <
      Advocate for the Disabled and All Missourians

      • Dee says:

        From what I read, an umbrella policy will require you to have both homeowners and auto insurance coverage in amounts equal to the amount of your deductible.

  14. Anonymous says:

    Cheap? My 1m umbrella is $550. I think its anothe rway the insurance companies are making money, agaiin. I’m thinking of cancelling it!

  15. Briana says:

    Depending on the price it might be worth it. We are in a situation where we are getting ready to be sued by another insurance cover for over $7K for something our auto insurance didn’t cover…something we would have thought would have been covered.

  16. Jim says:

    Geico just told me $475 but I also have a couple of cars on antique insurance which I have to raise the coverage on them as well. I’m shopping around. Geico seems to raise my rates at least once a year for no good reason.

  17. Joe says:

    I would read the fine print on those Umbrella policies, as you can see from the storms insurance companies will do anything not to pay so if you think they are going to just step in and pay out a million bucks think again. Do some research and find out how often they are paying on these claims when they get them.

    Briana, I can almost GUARANTEE you that if you regular insurance denied the 7K that your umbrella (if you had it) would have denied it also.

    I have supplemental insurance that pays 80% of what Medicare doesn’t, sounds great right so if I get stuck with $100 bill they pay $80. Here is the catch, if Medicare denies the claim they deny it also and I get stuck with the entire bill, trust insurance companies as far as you can throw them.

    IMO you are better off upping your auto and home liability as that coverage is more cut and dry, chances are any umbrella coverage would be through a 3rd party ( a different insurance than your auto or home) and then they would fight over who really has to pay

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