Do I Really Need Umbrella Insurance?

  • John A. Osborne
  • Jan 10, 2023
Small Business Insurance Oklahoma

As you go through life, you may encounter situations where you need insurance to protect yourself against potential financial losses. You likely have auto and homeowner’s insurance, but have you considered umbrella insurance? Umbrella insurance is an additional insurance policy that can provide extra protection when your other policies have reached their coverage limits. But, do you really need umbrella insurance? Let’s explore this question in more detail.

Firstly, it’s important to understand what umbrella insurance is and how it works. Umbrella insurance is essentially an extension of your existing insurance policies, providing coverage above and beyond what your other policies offer. For example, if you have auto insurance with a liability limit of $300,000 and you cause an accident that results in damages of $500,000, your auto insurance would pay up to $300,000, but you would be responsible for the remaining $200,000. However, if you have an umbrella insurance policy with a $1 million limit, it would cover the remaining $200,000.

What Does Umbrella Insurance Cover?

Now that we understand what umbrella insurance is, let’s explore what it covers:

  • Personal injury: Covers claims for things like libel, slander, defamation of character, and invasion of privacy.
  • Property damage liability: Covers damage to someone else’s property, such as a car or house.
  • Bodily injury liability: Covers medical expenses, lost wages, and other damages resulting from injuries you cause to others.
  • Legal fees: Covers legal fees for defending against lawsuits, even if the lawsuit is groundless.
  • Worldwide coverage: Covers you anywhere in the world.

When Do You Need Umbrella Insurance?

There are several situations where having umbrella insurance can be beneficial:

  • You have significant assets: If you have a lot of assets, such as a house, cars, investments, and savings, you may be a target for lawsuits.
  • You have a high net worth: If you have a high net worth, you may want to protect your assets from potential lawsuits.
  • You have a high-risk occupation: If you have a job that puts you at risk for lawsuits, such as a doctor or lawyer, you may want to consider umbrella insurance.
  • You have a high-risk lifestyle: If you engage in high-risk activities, such as owning a dog breed that is known to be aggressive, you may want to consider umbrella insurance.

How Much Umbrella Insurance Should You Get?

The amount of umbrella insurance you need depends on your assets and your potential risk for lawsuits. A good rule of thumb is to get enough coverage to protect your assets, plus an additional $1 million to $2 million. Here are some factors to consider when determining how much coverage you need:

  • The value of your assets: Calculate the value of your assets, including your home, cars, investments, and savings.
  • Your potential risk for lawsuits: Consider your occupation, lifestyle, and other factors that may increase your risk for lawsuits.
  • Your existing insurance coverage: Determine how much coverage you have with your existing insurance policies.


Umbrella insurance can provide valuable protection when your other insurance policies have reached their coverage limits. If you have significant assets, a high net worth, a high-risk occupation or lifestyle, or just want extra peace of mind, umbrella insurance may be a good investment for you. Consider your potential risk for lawsuits and the value of your assets when determining how much coverage you need. Talk to your insurance provider to learn more about umbrella insurance and whether it’s a good fit for your needs.

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