Umbrella insurance
Umbrella insurance is extra personal liability coverage above auto, homeowners, renters, condominium or similar primary insurance. It can pay covered damages and defense costs that exceed the primary policy's limit and may cover some liability claims the primary policy excludes. It does not generally pay for damage to your own home or vehicle.
Also called: umbrella policy, personal umbrella policy, umbrella liability
Umbrella insurance adds a second layer of liability limits on top of the policies underneath it. When a judgment or settlement is larger than the liability limit on your auto, homeowners or renters policy, the umbrella can respond to the covered damages above that limit, subject to its own terms. Because it is liability coverage, repairs to your own home or car stay with your property and auto policies, according to the NAIC (opens in a new tab). To decide whether you need one, read Do I Need Umbrella Insurance.
How an umbrella pays on a $1,250,000 judgment
Say a covered bodily injury claim ends in a $1,250,000 judgment. The primary auto liability limit is $250,000 and the personal umbrella limit is $1,000,000. Those limits are examples, not an average or a recommendation.
Hover or tap a row to highlight it.
| Item | Amount |
|---|---|
| Judgment for bodily injury | $1,250,000 |
| Primary auto liability limit | $250,000 |
| Personal umbrella limit | $1,000,000 |
| Primary auto insurer pays | $250,000 |
| Covered damages left after the primary policy ($1,250,000 minus $250,000) | $1,000,000 |
| Umbrella insurer pays | $1,000,000 |
| Remaining covered damages | $0 |
The NAIC cites $1 million above a $250,000 homeowners liability limit (opens in a new tab) as an example, and umbrella limits are typically $1 million or more, according to New York DFS (opens in a new tab). If the judgment were $1,500,000 with the same limits, the primary insurer would pay $250,000 and the umbrella could pay up to $1,000,000, which leaves $250,000 that could fall to the policyholder. The actual result depends on the policy, the coverage decision, exclusions, any retained limit and the outcome of the case, and defense costs follow the policy wording.
Choices that change what an umbrella does
An umbrella is not one standard contract, so the form and endorsements decide the details. A true umbrella can cover liability above the underlying limits and also certain exposures the underlying contracts leave out, according to the Connecticut Office of Legislative Research (opens in a new tab), and the options below change how that plays out.
- Umbrella limit. A higher limit raises the most that can be available for covered liability, while premium and eligibility depend on the insurer's rating plan and underwriting.
- Required underlying limits. An insurer may require specified auto, homeowners, renters, watercraft or other liability limits before it issues or renews the umbrella, according to New York DFS (opens in a new tab).
- Broader umbrella or strict excess. Some umbrella forms cover certain liability exposures the underlying policy does not, while a strict excess policy follows the underlying coverage more closely.
- Endorsements. These can add or restrict coverage for rental properties, home businesses, watercraft, recreational vehicles, aircraft, domestic workers, personal injury offenses or business activities.
A personal umbrella generally covers personal and family liability. A commercial umbrella sits above business policies such as commercial general liability under its own terms. An LLC is a legal business structure, not an insurance policy, so forming one does not create umbrella coverage, and a personal umbrella may exclude business activities unless the policy or an endorsement includes them. Connecticut owners can compare options in Connecticut Umbrella Insurance.
Where you will see umbrella insurance
Umbrella insurance is most often tied to auto liability, homeowners liability, renters liability, condominium unit-owner liability, watercraft liability and liability connected to an additional residence or rental property. It generally does not sit above life, health or pet insurance.
The term appears on quotes, applications, declarations pages, renewal notices, schedules of underlying insurance, insuring agreements, exclusions, endorsements, certificates of insurance and claim letters. The declarations page and the schedule usually show the umbrella limit and the underlying policies, and the exclusions and endorsements show what is removed, added or changed.
What Connecticut and New York change
Connecticut does not generally require a personal umbrella and sets no statewide minimum limit. A personal excess policy, identified as an umbrella, is not an automobile liability policy under Conn. Gen. Stat. § 38a-336 (opens in a new tab) and does not have to provide uninsured motorist coverage, according to the statute's annotations.
New York treats a personal umbrella as a covered personal-lines policy under Insurance Law § 3425 (opens in a new tab). Under § 3425(d)(1), an insurer that does not intend to renew, or that conditions renewal on changed limits or eliminated coverage, generally must give written notice at least 45 days and no more than 60 days before the policy period ends. New York courts applied that rule to changes in the underlying auto limits an umbrella requires, as in Gotkin v. Allstate Insurance Co. (opens in a new tab).
Questions to ask your agent or insurer
- What underlying liability limits must I maintain for auto, home, renters, condominium, watercraft, rental property or other scheduled risks? The umbrella may require specified primary limits, and a shortfall can create a gap before umbrella coverage begins, according to New York DFS (opens in a new tab).
- Does this policy provide only excess coverage, or does it also cover specific liability exposures excluded by my primary policies? Umbrella forms may be broader than the underlying policies, but exclusions and endorsements control.
- Are defense costs paid in addition to the liability limit or deducted from it? Legal expenses can change the amount left for a settlement or judgment, per the NAIC (opens in a new tab).
- Are my rental property, home business, watercraft, recreational vehicles, aircraft, domestic employees and LLC or other business activities covered?
- What notice will I receive if the insurer changes the umbrella limit, the required underlying limits or the coverage at renewal? New York law requires advance notice for nonrenewal or conditioned renewal of covered policies, including personal umbrellas, under Insurance Law § 3425(d)(1) (opens in a new tab).
Frequently asked questions
Short answers to questions that come up when reading a policy, a quote or a claim letter.
Does umbrella insurance replace my homeowners or auto insurance?
No. The umbrella sits above primary liability coverage, and the underlying policies stay responsible for covered claims up to their limits. The umbrella may then respond under its own terms.
How much umbrella coverage can someone buy?
Umbrella coverage is typically $1 million or more, according to New York DFS (opens in a new tab). The limits available, the required underlying insurance and the premium depend on the insurer and the policy form, so a quote shows the options for your situation.
Does an umbrella cover a rental property, a boat or an LLC?
These exposures may need separate insurance or a specific endorsement. A personal umbrella does not automatically cover business liability, and business risks generally call for commercial general liability and, where it fits, a commercial umbrella or excess policy. Disclose the exposure before you buy, renew or report a claim.