11 Reasons You Need Umbrella Insurance Right Now

An umbrella insurance policy can protect your assets and future earnings from expensive lawsuits.

An umbrella insurance policy can protect your assets and future earnings from expensive lawsuits. This type of policy increases the liability limits beyond the coverage offered by your auto and homeowners insurance policies. “Catastrophic financial loss could occur in seconds,” says Ana Robic, chief operating officer of Chubb Personal Risk Services. The cost of a lawsuit, medical expenses and legal fees can devastate your savings, but you can buy an umbrella policy that can provide millions of dollars of coverage for hundreds of dollars in premiums.

You can usually add $1 million of extra coverage for about $150 to $350 per year, and each additional $1 million of coverage costs $75 to $150. (You generally need to have at least $300,000 in liability coverage from your home insurance, and $250,000 per person and $500,000 per accident of bodily injury coverage from your car insurance first.) Use our umbrella insurance calculator to help estimate how much coverage to get. Check with your insurer and agent about what your home or auto insurance policy will cover and gaps you need to fill. An umbrella policy may be particularly valuable if you have the following risks.

You have a Teenage Driver

The risk of having an accident rises significantly when a driver is young, which is why auto insurance premiums are so high when you add a teen to your policy. An umbrella policy can pay out above the liability limits on your auto insurance policy if your teenager has an accident and injures somebody else or damages their car. It’s also a good idea for drivers of all ages to add underinsured/uninsured motorist coverage up to the liability limits of their umbrella policy. This protects you from damages and injuries caused by a driver who doesn’t have insurance or has too little liability coverage to cover your bills. It usually costs $100 to $200 per year to add uninsured/underinsured motorist coverage to your umbrella policy.

You Don't Choose Your Words Wisely

Social media gives you—and your children—multiple outlets to express yourself. But if your remarks cause others harm, they can sue you for personal injury. Nationwide Insurance offers these examples: You vent frustration about your kitchen remodel in an online review, and the contractor sues you for loss of business. Or your teenager forwards an inappropriate picture of a classmate to his friends, and the classmate’s parents sue everyone who saw it. You might also be at risk if you write a letter to the editor, picket a business, or speak out at a town council or school meeting.

Most homeowners insurance policies provide coverage for personal injury up to the limits of your liability coverage. If yours doesn’t, you can probably add it by buying a bundle of extra coverages that typically costs $50 to $100 a year, says Spencer Houldin, president of Ericson Insurance Advisors, in Washington Depot, Conn. Beyond that, you’ll need umbrella coverage. A personal-injury claim, however, will be excluded from any coverage if you intentionally say something to harm someone else, by lying, for example.

You Party Hearty

Entertaining brings with it all sorts of risks, such as a guest who falls on your property or is injured diving into your pool. And then there’s the “social host liability.” That’s the legal term (also known as “Dram Shop Liability”) for the criminal and civil responsibility of someone who provides liquor to his or her guests.

According to the Insurance Information Institute, 43 states have a version of this law. Generally speaking, if your guests—including your underage kids and friends who have imbibed—leave the party and injure others while driving under the influence, they and you could be sued for negligence. Check with your in

surance agent to find out what your liability is in your state, what coverage your homeowners policy provides to social hosts, and what additional protection you might need through umbrella coverage.

You Have a Swimming Pool

Any homeowner could be sued if someone is injured while visiting their home, but the risk gets much higher if you have a swimming pool—where someone can have a life-changing head or neck injury or drown. “There can be a tragic scenario with lifelong care issues,” says Chubb’s Robic. Your homeowners insurance, under it its medical payments coverage, can pay some of the medical expenses, but the liability coverage—and umbrella policy—can help with some of the more expensive long-term-care needs.

You Own a Trampoline

Recreational use of a trampoline is so dangerous that the American Academy of Pediatrics has long urged parents not to let their kids use one. Three-quarters of injuries occur when multiple people are jumping, especially an adult with a child.

Case in point: In 2012, a woman in New York state joined her nephew in jumping on his home trampoline. When the child jumped out of sync with her, she was thrown off balance, her foot struck the mat, and she fractured multiple bones in her foot, resulting in multiple surgeries, ongoing pain, an altered gait and the likelihood of future arthritis and more surgery. In 2016, a jury awarded her $220,000 for past pain and suffering and $580,000 for future pain and suffering.

Umbrella insurance typically covers the same things as the liability portion of your underlying homeowners insurance coverage. If you’re thinking about getting a trampoline, or already have one, check your homeowners coverage. A trampoline, like a swimming pool, is considered an “attractive nuisance,” meaning it may tempt others to use it without the owner’s permission. Insurers may forbid them entirely and cancel your homeowners policy if they find out you have one. They may also exclude coverage for claims arising from it, charge a “nuisance surcharge,” or require netting or a locked fence to limit access to it, according to Lawrence and Associates, a law firm in Cincinnati, Ohio. Once you’ve got the underlying coverage squared away, you can look into umbrella insurance.

You're on a Nonprofit Board

If you serve on a nonprofit board, you could be at risk if someone sues the group and its directors. “The biggest exposure is for things like bad decisions, harassment claims, libel or sla