What Is Umbrella Insurance?

Umbrella insurance is a generic term for insurance that covers "everything else".

You may known umbrella insurance by another, more specific name.

  • Excess Liability Policy
  • Personal Liability Insurance
  • Personal Liability Umbrella Insurance
  • Personal Umbrella Policy

For homeowners, umbrella insurance is a must.

Umbrella insurance kicks in where your homeowners insurance and auto insurance coverage caps out. It pays cash to protect you from the injuries you cause to others.

It also protects against excessive property damage; and, from lawsuits filed against you for injury or death which can easily exceed $1,000,000.

Umbrella insurance protects against bankruptcy.

Common umbrella insurance claims include:

  • Your dog injures a guest in your home
  • An injury caused by a babysitter’s negligence
  • A non-family member breaks a bone on your backyard trampoline

Umbrella insurance also pays on damages awarded in a courtroom which means it’s protection against wage garnishment, which is a mandatory paycheck deduction used to pay debt.

When you buy your house, you’ll purchase homeowners insurance to cover your home. At the same time, purchase an accompanying umbrella insurance policy.

Umbrella policies are inexpensive. They protect the money you have today, and the money you’ll earn tomorrow. Policies of $1,000,000 are relatively cheap.

Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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