An Umbrella Can Protect You When The Sky Is Falling

By Richard A. McGrath, CIC, LIA

You’ve insured your home, your car, your boat, your life and your health, so you should have all of the protection you need, right?

Well … not exactly.  Unless you also have an umbrella policy, you may be exposed to a risk that could cause financial ruin for you and your family.

The typical insurance policy has limits that can easily be exceeded – especially today, as multi-million dollar verdicts have become commonplace.  Umbrella liability insurance covers settlements in excess of what is covered by other insurance policies.  For example, if your auto insurance covers up to $300,000 million in liability and a case is settled for $1 million, the umbrella insurance will pay the $700,000 difference.  In other words, an umbrella will protect you when the sky is falling.

If someone dives off the diving board on your swimming pool and has a spinal cord injury, if your teen-ager has a drinking party and a serious accident results, if someone is making a delivery and has a serious injury on your property, the resulting liability costs could be far in excess of what your insurance covers.  If you are found to be negligent in a liability case, personal assets, such as your home, could be seized to settle the suit.

Umbrella liability insurance is relatively inexpensive, because the probability that you will ever need it is low.  However, if you’re unlucky enough to need it when you don’t have it, the consequences could be calamitous.

Depending on the policy you purchase, an umbrella policy typically costs hundreds of dollars, but adds an additional $1 million to $5 million in liability coverage.  Higher limits are available, too, but the cost may be significantly higher, because a much smaller pool of consumers is purchasing coverage with higher limits.  As a result, the risk is not spread among a high number of insureds.

What Your Current Policy Covers

Anyone who has insurance for a home, a car or a boat already has liability coverage, but the limits on the coverage will vary.

For example, insurance agents often recommend that consumers buy auto insurance with liability coverage that pays for bodily injury of up to $100,000 per person and $300,000 per accident, plus property damage of up to $100,000 per accident.  Homeowner’s insurance typically comes with a minimum liability coverage of $100,000, but insurance agents typically recommend liability coverage of $300,000 to $500,000.

Liability coverage will pay for expenses such as the injured person’s medical bills, physical therapy and lost wages.  It will also cover attorney’s fees.  Add up all of costs and they can easily exceed six figures.

In the past, umbrella policies were needed only by wealthy individuals with significant assets to protect.  Today, even the average consumer should consider purchasing umbrella liability protection.  It’s the only way to truly protect yourself from losing everything you own.

Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.  He can be reached at

This article is written for informational purposes only and should not be construed as providing legal advice.