Do I Need Umbrella Insurance?

An umbrella insurance policy gives an extra layer of liability coverage should you reach the limit on your underlying liability coverage in a homeowners, renters, or auto policy. It’s especially helpful in an increasingly litigious society, where a single high-dollar lawsuit could leave an individual facing millions in damages — a financial blow that could impact long-term net worth.

Umbrella insurance policies help protect you against lawsuits involving damage to someone else’s property and personal injury. It’s a buffer between any lingering liabilities and your hard-earned assets and savings. “What you’re purchasing is peace of mind,” says Tom Darling, a Texas Farm Bureau Insurance agency manager in San Antonio.

So, who needs an umbrella insurance policy?

“Typically, it’s going to be for people who have more assets than average,” says David Garza, an Agent in San Antonio. “The more assets and exposures you have, the more likely you’re going to need an umbrella.”

Umbrella insurance policies can offer broad coverage, so Darling and Garza outlined five scenarios in which you might need an umbrella policy.

1. You have one or more teenage drivers.

Young, inexperienced drivers naturally elevate a family’s risk and exposure factors. Distracted driving and speeding are most often to blame. In 2018, vehicle accidents among teens generated approximately $11.8 billion in medical costs and lost wages, according to the Centers for Disease Control and Prevention. An umbrella policy can offer an extra layer of protection should your teen get into an accident that exhausts your auto insurance’s liability limit.

2. You own property.

This includes a vacation home or rental house. Don’t assume that your underlying policy will be enough protection should you face a lawsuit as the result of someone getting hurt on your property. Having an umbrella policy will extend your liability coverage beyond the limits of your property insurance policy, which usually range between $300,000 and $500,000.

3. You’re close to retirement.

Protect your nest egg from an unexpected liability lawsuit. Usually, most employer-sponsored retirement accounts and up to $1 million in independent retirement accounts (IRAs) are protected from lawsuits. But it’s wise to consider your other more vulnerable assets, such as savings accounts.

4. Your assets have grown significantly.

The more you’ve contributed to your net worth, the more you should consider an umbrella insurance policy. It might be time for an umbrella policy, for example, if you’ve acquired more than one car or home and your primary home’s equity has increased.

5. You have pets.

Having a pet or other animal on your property can increase your exposure to risk. If your beloved dog bites a visitor or neighbor and causes bodily harm, you could be on the hook for legal expenses and damages. An umbrella policy could provide additional coverage if the amount surpasses your homeowners’ coverage.

What’s the Cost?

Texas Farm Bureau Insurance Agent Tom Darling has seen umbrella policy premiums range from $250 to $4,000 a year. The cost can vary. Bottom line: The level of umbrella coverage you choose is a personal choice that depends on your assets, risks, and desired level of coverage, Darling says. And it’s a decision that your Texas Farm Bureau Insurance Agent can walk you through.

How Much Is Covered?

An umbrella insurance policy can cover up to $10 million, but $1 million is the most common coverage, Darling says. This type of policy can be purchased in million-dollar increments, offering you a good amount of coverage for your needs.

Call your Texas Farm Bureau Insurance Agent today if you think you and your family could benefit from an umbrella policy.

Coverage and discounts are subject to policy terms and qualifications and may vary by situation.