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What Is An Umbrella Policy & Why Is The Cost Skyrocketing?

November 17, 2024

Umbrella insurance policies extend over all of your assets your car, home, and rentals in your personal name.

By Lance Anderson

Umbrella Insurance policies are an affordable way to add a layer of liability protection on top of your current coverage that protects your assets in case of a large liability claim.

Here are a few things to know about umbrella coverage:

Umbrella policies extend over all of the assets within that entity. In other words, your personal umbrella will extend coverage over your car, home, and rentals in your personal name. If you have registered rental properties in LLCs, you will need a commercial umbrella policy, which will cost a little more than a personal lines umbrella.

Umbrella insurance provides an extra layer of protection beyond your underlying liability limits. It safeguards your assets from costly lawsuits such as accidents like slips and falls, property damage, defamation, and, most frequently, car accidents.

BUNDLE YOUR UMBRELLA COVERAGE

It’s important to recognize that umbrella insurance companies, especially on a home, auto, and rental property risk, will want to cover everything you have, i.e., all of those policies should be with the same carrier.

Sometimes, we have clients whose home and rental portfolios are with our agency, yet they want to insure their cars with a discount online auto carrier and have us write an umbrella.

Insurance carriers just don’t do that; they want to know what is going on with the auto risk, who the drivers are, how many cars, etc. Your risk out on the road is far greater than an injury at your home or rental property, so pay the extra money to get the protection you anticipate from your umbrella insurance.

UNDERLYING LIMITS

An umbrella insurance policy will also require you to carry higher underlying limits on your auto, home, rental property and other policies.

Typically, the underlying limits required for your auto insurance are $250,000/$500,000 and $300,000 for property insurance. If your current limits are the typical $100,000/$300,000, increasing your underlying auto and home limits will cause an increase of about $1000.00 per year including the cost of the $1,000,000 umbrella policy. The underlying limits are “stacked” on top of the $1,000,000 umbrella, so your overall liability limit with an umbrella is the underlying limits + the umbrella limit.

WHAT DOES AN UMBRELLA POLICY COST?

At Anderson Insurance Group, we have seen the cost of a personal umbrella increase to about $400.00 per year in 2024.

If you have young drivers, multiple cars, and rental properties, the cost can be as high as $1000.00. We have seen the cost of commercial umbrellas triple in 2024. There has been a 45% increase in $1,000,000 umbrella insurance claims opened in 2032 compared to 2021, according to insurance provider USAA. Combined with inflation, this has caused the cost of umbrella policies to dramatically increase in recent years.

HOW MUCH COVERAGE DO YOU NEED?

Financial planners often advise carrying liability limits equal to your net worth.

Dave Ramsay Solutions advises if your net worth exceeds $500,000, you need an umbrella policy. Many online calculators can help you determine the umbrella coverage you need. Balance your needs with the cost, and we think you will find an umbrella policy a good value.

UMBRELLA vs EXCESS LIABILITY COVERAGE:

A true umbrella will provide coverage for a wide range of exposures, such as worldwide coverage or coverage for a rented boat or ATV.

Excess liability policies are what the industry terms “follow forms” and will only provide coverage above the limits of an existing policy. When given the option, choose an umbrella policy over an excess liability policy for the broader coverage it provides. You will want to reach each policy and consult your agent on the merits of each.

UNINSURED MOTORIST UMBRELLA COVERAGE:

I am a big fan of UM & UIM coverage on the umbrella policy.

This is an inexpensive way to add an additional $1,000,000 of under and underinsured motorist coverage and will stack on top of your underlying limit. As a cyclist, who occasionally ventures out on the road, if I am hit as a cyclist/pedestrian and seriously injured, I can claim under my umbrella UM/UIM coverage.

DO YOU NEED AN UMBRELLA POLICY?

Now more than ever, umbrella coverage is an important way to protect your assets.

We live in a very litigious world; attorneys are more aggressive than they have ever been, and did you know there are organizations that fund lawsuits? That’s right, if they feel there is a good chance they will win, they will front the money and inevitably, its less expensive for the insurance companies to pay than to risk losing in court, seldom do the courts side with the insurance companies. These factors and increasing inflation make an umbrella policy an important part of your asset and financial protection.

Reach out to Anderson Insurance Group today and let’s discuss how to best protect your rental properties.

About the author:

Lance Anderson has been a landlord for over 25 years and an insurance agent for over 30. Give Lance or Andres a call. As landlords and experienced insurance agents, they will make sure you have the best protection for your rental and investment properties.

Call: 801-262-1551 Text: 801-758-9046
Call us for more information on renters insurance and any questions you have about land lording, we love helping our customers be successful Utah landlords. Call our office at 801-262-1551 or Click Here for a for a consultation with our experienced team. Find out more about umbrella insurance.

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