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How much does umbrella insurance cost?
Get a low-cost policy covering liability expenses that exceed your car or home insurance coverage.
Getting an umbrella insurance policy may seem like an extra expense for something you may never need. But for less than the cost of a monthly streaming service, you can add up to $1 million in liability coverage to your auto or home policy to cover you and your whole family.
How much does umbrella insurance cost?
How much you pay for your umbrella policy depends on where you live and how many vehicles or homes you own. But typically, $1 million in coverage costs between $150 and $300 a year, or $12.50 to $25 per month. Umbrella coverage is sold in increments of $1 million, with the next million adding $75 to your annual premium and an additional $50 for every million after that.
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How much umbrella insurance do I need?
The amount of coverage you need depends on how much you have to lose. Umbrella policies are available up to $5 million at most companies, but to determine what you need, consider the following factors:
- Your net worth. This number is basically your assets minus your debts, and includes the value of your home’s equity and your retirement plans. The more assets you have, the more you may need in liability coverage.
- Your future worth. The value of your future income or businesses owned are important to consider in case a judgment against you opens you up to a long-term settlement.
- Coverage limits. If you have lower limits on your current home or auto coverage, you may need more liability through your umbrella policy.
Many companies offer calculators to help you determine your net worth and coverage needs after you enter financial details, such as your assets, debts and coverage limits.
Compare car insurance with umbrella coverage.
What factors affect umbrella insurance costs?
The cost of your insurance premiums are mostly based on risk, and umbrella insurance is no different. The following risk factors may affect what you pay for your policy:
- Home dangers. Swimming pools and trampolines are often labeled as high-risk in insurance policies and may even keep you from being covered.
- Pets. Certain breeds of dogs are often considered high risk, even if they have a great temperament, based on their physical ability to cause damage or injury.
- Lifestyle risks. If you’re into high-injury sports — such as surfing, skiing or hunting, or extreme sports — such as skydiving or bungee jumping, you may be considered a higher risk that requires additional liability coverage.
How to save on umbrella insurance
An umbrella policy is less costly than other forms of insurance, but there may be ways to save money on your home and auto policies when you add this coverage.
- Bundle your insurance. Getting your umbrella policy from the same company that holds your home and auto policy can often get you a discount of up to 10% off your annual premium.
- Ask for a discount. Your car insurer may have a list of discounts, such as a safe driver, loyalty or antitheft discount. If you qualify, you could save between 5% and 25%, depending on the company. A cheaper auto policy can offset your cost for an umbrella policy.
- Adjust your deductible. Also called self-insured retention, this function as the deductible for your umbrella policy, a higher deductible brings your premiums down. But, it also means you’ll pay more out of pocket before your coverage kicks in.
- Compare insurance companies. Adding umbrella coverage may be a great excuse to compare insurance quotes and make sure you’re still getting the best price for the coverage you need.
Why is umbrella insurance cheaper than car or home insurance?
Your umbrella policy is secondary coverage, meaning it doesn’t pay out until you’ve exhausted your home or auto policy coverage. And most insurers require you to have at least $250,000 in auto coverage and $300,000 in homeowners coverage before it offers you umbrella coverage.
If your liability expenses never exceed your original home or auto policy’s liability limit, then you may not use your umbrella coverage. For example, if the repairs to a third party’s car and their medical expenses only cost $100,000, your car insurance may cover the accident in full. But if the other driver decides to sue you, having the money to cover those legal expenses and any judgment against you may keep you from bankruptcy.
Umbrella insurance is a relatively low-cost way to make sure you’re covered if the worst happens and you’re at fault. But to save money, get your policy from the company that carries your current auto and home policies, make sure to ask if you qualify for any discounts and take the time to compare policies to make sure you’re getting the best coverage for you.
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