Insurance
What is Umbrella Insurance?
Umbrella insurance provides extra liability coverage above what your auto or homeowners policy covers. It protects your assets from major lawsuits. It acts as an additional layer of asset protection, safeguarding net worth, savings, and future earnings in the event of major lawsuits or significant liability judgments.
To purchase an umbrella policy, insurers require the policyholder to maintain baseline limits on their primary auto and homeowners liability coverage. Once those primary limits are exhausted, the umbrella policy triggers, typically providing coverage in increments of $1 million.
At a Glance
PRACTICAL EXAMPLE
An individual has an auto policy with $300,000 in bodily injury liability and a $1 million umbrella policy. They cause an accident resulting in a $900,000 judgment. Their auto insurance pays the first $300,000, and their umbrella policy pays the remaining $600,000, protecting their savings.
Official References
- Disability — Social Security Administration
- Erisa — U.S. Department of Labor
Last reviewed: July 12, 2026
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