Let’s face it: life can be unpredictable.Imagine you’re in a car accident, and the other driver sues you for far more than your auto insurance can cover.Would you be prepared? If your answer is no, umbrella insurance might be just what you need.

Before diving into how much of it you need, let’s first cover the basics.What is It?Umbrella insurance is additional coverage that provides protection beyond existing limits of your existing policies.Think of it as an extra layer of protection over your assets—just like an umbrella.This coverage can extend to auto, homeowners, or other policies.For example, your typical auto insurance policy may have a maximum liability limit of $500,000.

But what does that mean? If you are legally responsible for a $1 million settlement, your auto insurance would cover only the first half, and you’d be left to pay the other $500,000 out of pocket.That’s where umbrella insurance is practical.It picks up where your primary insurance leaves off, covering the remaining amount up to your policy limit.In this case, your umbrella policy would cover the remaining $500,000.What’s Covered?The protection that’s offered depends on the policy itself.

However, here are some general examples of what it can cover for you or members of your household:What Isn’t Covered?It’s important to note that this extra protection is primarily for liability.Here are some examples of what it does not cover:Damage to Your Own PropertyUmbrella insurance doesn’t cover damage to your property, such as your car or home.Auto and homeowners insurance are designed to handle that.

For example, in the car accident scenario mentioned earlier, if you’re injured, umbrella insurance won’t cover your medical bills.Intentional Harm or Criminal ActivityUmbrella insurance won’t cover legal expenses or damages resulting from intentional actions.If you deliberately harm someone in a fight or vandalize their property, your umbrella policy won’t protect you.It’s meant for accidental harm, not criminal or intentional behavior.Business Activities If you run a business and a customer sues you for a product defect, umbrella insurance won’t cover that, since it arises from business activities.

A commercial umbrella policy or separate business liability policy would be needed for such claims.If you have questions about what’s not covered, feel free to contact Atlas Insurance Brokers for clarification.How Much Coverage Do I Need? By now, you should now have a basic understanding of umbrella insurance.Let’s take a deeper look at how much coverage you might need.As Allstate explains, umbrella insurance comes into play once your existing property insurance is maxed out.Some insurers may require you to have a minimum of $250,000 in auto liability and $300,000 in homeowners liability insurance before they’ll offer you an umbrella policy, according to the Insurance Information Institute.Umbrella policies are typically sold in $1 million increments.

Here’s a breakdown of common options:$1 millionThis is the most common starting point for umbrella insurance policies.It’s usually sufficient enough for many property owners, offering protection for your car, home, or other assets.$2-5 millionThis range suits individuals with substantial assets, such as expensive property.More coverage is needed in case of a significant lawsuit or serious accident.

Higher coverage is largely important for those with sizeable assets or higher incomes.How Much Does Umbrella Insurance Cost? You might be surprised to learn that umbrella insurance is quite affordable.According to NerdWallet, a $1–5 million umbrella policy typically starts at around $200 per year, based on information from Trusted Choice, a network of independent insurance agents.On average, a $1 million policy costs about $380 annually.That breaks down to about $32 per month.

However, keep in mind that your premium can vary depending on factors like:Opting for $2–5 million in coverage will result in a higher premium.Do I Need It? As mentioned earlier, life can be unpredictable.Umbrella insurance provides peace of mind if you’re hit with a lawsuit or a bill for damages on your property.This extra layer of protection is especially valuable if you have significant assets or are at a higher risk of being sued.The Bottom LineDeciding whether to add an umbrella policy to your insurance involves several factors.Consult an agent to discuss your options and ensure you’re adequately protected.