Umbrella Insurance: Do You Need It?

Most people have homeowners, auto, and maybe even a liability policy built into their insurance coverage. But what happens if you’re involved in a major accident or legal claim that exceeds those coverage limits?

That’s where umbrella insurance comes in. Umbrella coverage is one of the most overlooked—but most valuable—protections available. It provides an extra layer of financial security when the unexpected happens and someone pursues damages beyond what your standard insurance will cover.

If you own a home, have savings, invest, or simply want added protection from potential lawsuits, an umbrella policy may be worth considering.

What Umbrella Insurance Does

Umbrella insurance extends your liability protection above the limits of your existing policies. If a claim goes beyond the coverage provided by your homeowners or auto insurance, the umbrella policy steps in to cover the remaining exposure—up to the limits you select.

This protection typically applies to:

Injuries on your property
Auto or boating accidents
Legal defense fees
Personal liability lawsuits

Accidents involving household members

Without umbrella insurance, if you’re held liable for more than your primary insurance covers, the remaining settlement could be paid from your personal assets—including savings, investments, home equity, or even future income.

Who Should Consider It

Not everyone needs umbrella insurance, but many people underestimate their exposure.

It becomes more important if you:

Own a home, vacation property, or rental property

Have a significant investment portfolio or savings
Have a swimming pool, trampoline, or dog (particularly certain breeds)
Frequently host guests at your home
Have teenage drivers in the household
Volunteer on boards or committees
Have a public-facing career or visible net worth

Essentially, if there’s a chance someone could sue you—reasonably or not—for damages, umbrella insurance provides an added safeguard.

How Much Coverage Should You Have?

Most insurance companies offer umbrella coverage starting at $1 million, with the option to increase in $1 million increments. The right amount depends on your assets, income, and level of risk.

In general, many professionals, retirees, and families opt for $2–5 million of coverage to meaningfully protect assets and future earning capacity.

Cost and Value

One of the most compelling reasons to consider umbrella insurance is the cost. Policies are surprisingly affordable—often between $150 and $400 per year per $1 million of coverage. Compared to the financial consequences of a large lawsuit, it is one of the most cost-effective risk-management strategies available.

Bottom Line

Umbrella insurance isn’t about expecting the worst—it’s about planning responsibly and protecting what you’ve built. A single accident or lawsuit can create long-term financial strain, even when you have standard insurance in place.

If you want additional peace of mind, especially as your financial life grows more complex, umbrella insurance can be a smart, affordable way to strengthen your overall protection and reduce risk.

By James Blue, Fee-Only Advisor | Blue Advisors

James Blue is the founder of Blue Advisors, a fee-only financial planning and investment management firm based in Columbus, Ohio.

This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. The views expressed are those of the author as of the date published and are subject to change without notice. Blue Advisors is a fee-only registered investment advisory firm. Advisory services are offered only pursuant to a written advisory agreement and to clients in the State of Ohio, the Commonwealth of Pennsylvania, and other jurisdictions where Blue Advisors is properly registered or exempt from registration. Past performance is not indicative of future results. Readers should consult with their financial advisor, tax professional, or attorney before making financial decisions.