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Who Needs Umbrella Insurance?

Without an umbrella, rainy days will get you wet. But you’ll eventually dry off and go about your day.

Without umbrella insurance, a “rainy day” (like a lawsuit) could potentially wipe out everything you’ve worked to build. Umbrella insurance is one of the best ways to protect your money and lifestyle.

But what exactly does umbrella insurance cover? And how do you know if you need it?

If you’re asking yourself, Do I need umbrella insurance?, we can help you find the answer.

Let’s dig in!

What Is Umbrella Insurance? 

Umbrella insurance is an extra layer of personal liability coverage for people with a higher net worth. It protects your assets from lawsuits that could cause you to lose everything you’ve worked for. It also covers large claims that wouldn’t be covered by a standard auto insurance or homeowners liability policy. It even fills in gaps in your boat insurance policy. Umbrella insurance is added on top of existing home, auto or renters insurance policies, and only comes into effect after the liability limits of auto or home insurance are met.

Think of it as a giant umbrella for your money that fills in the gaps normal insurance won’t touch. It also protects your family and other household members. So if your teenage daughter causes a nine-car pileup on the interstate, you’ll be covered!

What Does Umbrella Insurance Cover? 

So, what exactly does umbrella insurance cover? Good question.

With umbrella insurance, you’re protected in these four main areas:

Bodily injury—Your dog bites your neighbor (bad dog, sit, stay!) and it’s getting expensive really fast. Umbrella insurance will help with medical costs or lawsuits above and beyond your typical homeowners insurance policy for someone who gets injured on your property.

Property damages—If you’re in a bad car accident, car insurance liability is great—but it has limits. Umbrella insurance will cover the rest of the damages. It even covers repair costs if you wreck rented equipment (like if you crash your rented Jet Ski into the dock). Or if your kid damages school property, umbrella can help with that too.

Injury to reputation—If you hurt someone’s reputation (in person, online or even maybe in the metaverse?), you could be facing a pretty big lawsuit. And if you lose, you’ll be thanking your lucky stars you have umbrella insurance.  

Court costs—Umbrella insurance also covers legal fees if you’re sued for any reason. So you don’t have to pay for everything out of pocket just to defend yourself.

What’s Not Covered by Umbrella Insurance?

There are some things umbrella insurance doesn’t cover. Here are five instances when you should not rely on umbrella insurance.

Personal property—Umbrella insurance won’t help you if you accidentally destroy one of your belongings. It only covers other people’s injuries or property damage.

Criminal acts—If you intentionally harm someone, umbrella insurance won’t cover their injuries or any lawsuits that result. You’re on your own.

Business incidents—Umbrella insurance won’t kick in for business liability. That’s what commercial insurance is for.

Flood damage—Similar to homeowners and renters insurance, umbrella insurance won’t kick in when those flood waters rise. You’ll need flood insurance to cover flood damage.

Contracted worker injuries—Umbrella insurance won’t cover workers who are under contract and get injured on your property while working. Make sure any construction company you use has their own insurance, otherwise you could be at risk.

Who Needs Umbrella Insurance? 

If you have a net worth higher than $500,000, you need umbrella insurance. This is because the more you have, the more you have to lose, and normal insurance policies won’t provide enough coverage. So if you’re on the path to millionaire status (way to go!)—or you’re already there—umbrella insurance is for you.  

Also, the reality is that wealthy people often have a target on their back. Maybe you’ve heard of friends or family who were sued and lost everything. You’re wondering, Am I next? In a world where people can and do file a lawsuit over just about anything, some people’s idea of a get-rich-quick scheme is suing a rich person (sad but true). But with a healthy umbrella insurance policy in place, you won’t need to worry about lawsuits wiping out your hard-earned wealth.


How Much Umbrella Insurance Do I Need? 

If you’re wondering, How much umbrella insurance do I need?, we’ll show you how to figure that out.

First, umbrella insurance begins at a minimum of $1 million worth of coverage. A good rule of thumb is that your umbrella insurance should cover your entire net worth. Now’s not the time to be cheap. You should also look seriously at your risk of being sued. If it’s higher (and be honest), you should get more coverage.

If you fall into at least two of these categories, you might need more than the $1 million minimum coverage:

  • You own property
  • You have recreational vehicles (Jet Skis, dirt bikes, etc.)
  • You have an inexperienced driver in your household
  • You coach kids’ sports
  • You regularly invite people over to your home
  • You have “attractive nuisances” to a curious child (trampoline, pool, etc.)
  • You drive a luxury car
  • You serve on a board or nonprofit
  • You regularly post reviews of products and businesses
  • You participate in sports where you could injure others (hunting, skiing, etc.)
  • You frequently travel outside the U.S. and worry about liability claims
  • You are a landlord
  • You have a public profile of success and wealth

Protect your wealth with umbrella insurance.

You’ve worked years to build your legacy. Keep it safe for the future with a RamseyTrusted pro in your corner.

Connect With a Pro Today

How to Get Umbrella Insurance 

If you’re someone with a higher net worth, you’re at risk. And you didn’t work this hard over all those years to let someone else come along and wipe it out with just one lawsuit.

Umbrella insurance protects your money, assets, lifestyle and your future legacy. Don’t put this off!

One of our experienced insurance agents who is part of our Endorsed Local Providers (ELP) program can look at your situation and shop to find you the best deal. And they’re RamseyTrusted, meaning they’ll go above and beyond to make sure your assets are protected.

Connect with an ELP today to get free umbrella insurance quotes.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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