What Happens if I Do Not Have an Umbrella Policy
Without an umbrella policy, you are relying on your auto and home liability limits to cover a serious claim, and those limits can run out before the claim does.
You're exposed for whatever a judgment costs beyond your other policy limits
If someone sues you after an accident and wins more than your auto policy pays out, you owe the rest yourself. That can mean your savings, and in some states, a portion of future wages, until the judgment is satisfied. An umbrella policy exists to pick up where your auto or home liability coverage stops.
For a driver who still owns a home, has savings, or has assets a lawyer could pursue, this matters more than it did decades ago. Medical costs and jury awards have grown, and a single serious accident can cost more than most liability limits provide. Whether you need one depends on what you have to protect and how much liability coverage you already carry.
What you own changes how much this risk matters
If you rent, have modest savings, and don't have much income left to garnish, a judgment above your policy limit has less to reach. The risk is still there, but there is less for a lawsuit to take.
If you own a home, have retirement accounts, or have other savings built up over the years, that's exactly what an umbrella policy protects. Without one, those assets are what a court can order you to turn over if a claim exceeds your auto or home coverage.
This is worth working out honestly. Add up your savings, your home equity if you own, and anything else a creditor could reach. That number, more than your age or your driving record, is what tells you how much is actually at stake.
Your auto liability limits are the first thing that gets used up
An umbrella policy only pays after your auto or home policy's liability limit is exhausted. So the first thing to check is how high that limit already is. Someone carrying a low liability limit is more exposed than someone who has already raised it, even before considering an umbrella policy.
Many drivers find their state's minimum required liability coverage is lower than what a serious accident could cost in medical bills and lost income for the other driver. If you're only carrying the state minimum, raising that limit is often the first step, sometimes before an umbrella policy even makes sense.
Ask your insurer what your current liability limit is and what it would cost to raise it. Ask separately what an umbrella policy would require as an underlying limit, since most insurers set a minimum auto or home liability limit before they'll sell you one.
Questions people ask about this
Does an umbrella policy cover a car accident I cause?
Yes, if the claim exceeds your auto policy's liability limit and the accident is the kind of liability the umbrella policy covers. Check your policy's terms, since some exclude certain situations like using your car for business.
Can an umbrella policy protect my house from a lawsuit?
It can help, by covering a judgment that exceeds your home or auto liability limits before it reaches your other assets. It doesn't stop a lawsuit, it provides money to pay a judgment instead of that money coming from your home equity or savings.
Do I need an umbrella policy if I don't own a home?
You may still want one if you have savings, a retirement account, or other assets a judgment could reach. Renters can be sued just like homeowners. What matters is what you have, not whether you own property.
Will my insurer require me to raise my auto liability limit first?
Most insurers do require a minimum underlying liability limit before they'll sell you an umbrella policy. Ask your insurer directly what that minimum is, since it varies by company.
What happens if a judgment is more than my umbrella policy covers?
You're responsible for the remaining amount yourself. An umbrella policy raises your total coverage, but it still has its own limit, and a judgment can exceed that too in a serious case.
See what it would cost to raise your liability limits or add umbrella coverage before you decide.
Pull your current auto and home policies and find your liability limits. Add up what you have to protect: home equity, savings, retirement accounts. Call your insurer and ask what raising your liability limit would cost, and separately what an umbrella policy would cost given what you already carry. Ask what underlying limit they require before they'll sell you one. Do this before your next renewal, while you have time to compare what a higher auto limit costs against what an umbrella policy adds.
