How much does umbrella insurance cost?
Umbrella insurance can be surprisingly affordable when considering the amount of liability coverage it offers. Typically priced at a few hundred dollars, a personal umbrella insurance policy can provide protection for up to $5 million or more. Your umbrella policy's actual cost depends on several factors, such as your location and number of homes and motor vehicles. The higher your net worth, the more umbrella coverage you may need—which, of course, raises your umbrella policy's cost.
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How much does a $1 million dollar umbrella policy cost?
Umbrella policies typically start at $1 million in liability coverage. According to an ACE Private Risk Services report noted by Forbes, the average cost a $1 million personal umbrella policy is $383 per year for an individual with one home, two cars, and two drivers.
If you need more than $1 million in liability coverage, your policy's cost will increase. Per Money.com's chart, the cost for umbrella insurance will typically go up by $75 for every $1 million in coverage.
In addition to your policy's limit, the cost of umbrella insurance may be influenced by the following components:
- Location
- Motor vehicle history, including previous violations and accidents
- Previous homeowners insurance claims
- Credit history
- Number of homes, automobiles, and other vehicles, such as boats, motorcycles, and RVs
When is an umbrella policy worthwhile?
Umbrella insurance is designed to safeguard your wealth when the liability limits on your motor vehicle and homeowners policies have been maximized.
Personal liability coverage on your homeowners policy typically won't offer more than a $500,000 limit. The same is generally true for your auto policy's bodily injury and property damage liability coverage. An umbrella insurance policy applies when you're liable for an amount above the liability limits on your underlying policies.
Example 1:Your homeowners policy's personal liability limit is $500,000. Your dog gets loose and causes serious injuries to your neighbor's children, and you're liable for $650,000 in medical bills. Your homeowners policy may pay up to $500,000, and your umbrella insurance policy could cover the remaining $150,000.
Example 2:You're at fault in a multi-car accident on the highway, causing injuries to other drivers and their passengers, totaling $700,000. Your auto policy's bodily injury liability limit per accident is $500,000, so your umbrella policy could cover the remaining $200,000. Additionally, you're liable for $400,000 worth of property damage, but the property damage liability limit on your auto policy is $250,000. Umbrella insurance could pay the remaining $150,000.
As the examples show, umbrella insurance can protect you from paying hundreds of thousands of dollars out of pocket. That makes an umbrella policy potentially invaluable, especially when you consider that the cost of umbrella insurance may be less than the cost of homeowners insurance or even the price of an auto insurance policy.
Are there disadvantages to umbrella insurance?
It may not be worth paying for umbrella insurance if you aren't a high net worth individual. If your net worth is less than $500,000, your motor vehicle and homeowners insurance policies will typically offer insurance limits that protect your assets. Note that umbrella insurance won't cover your injuries or property.
What does your net worth have to be to buy umbrella insurance?
There are no net-worth restrictions to purchase umbrella insurance. Anyone who desires more liability coverage than their motor vehicle or homeowners policies provide can purchase an umbrella policy. Even if you have no assets, an umbrella policy could offer valuable protection against large financial losses and lawsuits.
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