Umbrella Car Insurance Policies: What Do They Cover?

An umbrella car insurance policy provides additional car insurance coverage in case of serious injuries or damages. Umbrella car insurance policy coverage usually includes legal fees, medical bills, hardships, and pain or suffering. Since such a wide range of possible expenses are covered, your umbrella car insurance policy limit must be carefully considered. Assess your car insurance policy and decide if an umbrella car insurance policy is worth the cost.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 19, 2021

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Here's what you need to know...

  • It provides protection above and beyond your current auto insurance policy
  • It covers bodily injury liability claims and lost wages due to an accident
  • It may even provide added coverage for legal fees and false arrest, not to mention coverage for libel and slander

Auto insurance is important to have to protect yourself and your assets. In fact, most states now require you to have auto insurance on your vehicle in order to drive it.

But what happens when your auto insurance isn’t enough to cover the cost incurred as the result of an accident?

Find out how an umbrella insurance policy can be of great benefit to you when your auto insurance just isn’t enough.

Start comparing car insurance rates now by using our FREE tool above!

What is umbrella insurance?


Umbrella insurance coverage goes above and beyond the coverage your auto insurance provides. It acts as an added cushion when your existing coverage surpasses its cap.

If you are at fault in an accident and the damages exceed what your policy covers, the other party could potentially come after your personal assets. If your assets are not sufficient enough to cover the debt, your wages could even be garnished.

While you may think it may never happen to you, the fact of the matter is a serious accident could happen to anyone and could easily produce damages that go beyond what your current auto insurance covers.

For example, let’s say you got into an auto accident, you were at fault, and your liability coverage has a maximum of $200,000.

The other driver was seriously injured, hospitalized, and had to undergo rehabilitation.

Tallying up the total cost, a judgment of $800,000 was reached, which also accounted for the pain and suffering the injured driver endured as well as wages lost during that time.

This is where an umbrella policy would come into play and cover the additional $600,000 that your auto insurance did not cover. If you did not have the umbrella insurance policy, you may be personally liable for the additional $600,000.

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What exactly does umbrella insurance cover?

An umbrella policy not only offers additional auto insurance coverage, but it also may offer coverage for situations not offered by other types of insurance.

Many umbrella policies may include coverage for legal fees, medical bills, pain and suffering as well as other hardships that the injured party will have to endure.

How to choose the right umbrella insurance policy with the right amount of coverage

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Another reason to consider an umbrella policy is your net worth. Do you have a substantial amount of assets that you want to protect? Or do you have young teenagers who just received their license?

These are all valid reasons to consider an umbrella policy, but even if you don’t have a high net worth it is important to protect yourself from the disaster of financial ruin.

Most umbrella insurance policies offer standard coverage of:

  • $1 million
  • $2 million
  • Up to $5 million or more

Even though umbrella policies offer a substantial amount of coverage, you can purchase the insurance at a relatively affordable rate.

This is why it is always important to shop around and compare quotes from multiple insurance companies first.

Once you have a few competitive quotes at your reach, you can deliberate and choose the policy that will work best for you and your family.

The umbrella policy was created to help protect the policyholder by providing additional coverage in the event of a serious accident not fully covered by auto insurance.

By purchasing an umbrella insurance policy for your vehicle, you can rest a little easier by knowing that you will be fully covered in the event of a serious auto accident and your assets will remain safe.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!



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