What is Umbrella Coverage?

An “Umbrella” policy is a separate liability policy that provides an extra layer of protection over and above an existing insurance policy.    The umbrella policy works like a safety net covering over and above the underlying policy limits when they have been exhausted.  Due to the litigious nature of our society, having an umbrella policy in place is very important in protecting your assets and future earnings.

How Does and Umbrella Policy Work?

In order to obtain an umbrella policy, you must have an underlying policy in place such as auto, home or business owners insurance.  The umbrella policy sits “on top” of these underlying policies in the event they do not provide sufficient protection to cover the total costs associated with a liability lawsuit you are responsible for.

Umbrella policies are written in $1,000,000 limits.  A typical personal umbrella policy covering a home and (2) two auto policies may be as little as $10-$15 per month for each $1,000,000 in coverage.

A typical commercial umbrella policy covering (2) 20 unit apartment buildings may be $35 per month for each $1,000,000 in coverage.

For example, what would happen if you were at fault in a car accident where someone was fatally injured and the court ordered restitution in amount of $1,000,000?

If you had $250,000 of liability insurance on your auto policy and no umbrella coverage, you would be short $750,000.  If you had a $1MM umbrella policy in place, your auto policy will pay for the first $250,000 and your umbrella policy would pay the remaining $750,000.

Who Needs Umbrella Insurance?

While in the past, the average person would have no need for such coverage, the situation is much different now. Even if you have only modest income and assets, you can be sued for future earnings to recover the damages and make restitution where you have been found negligent.

Let’s illustrate real life facts;  In 2013 Washington State had 436 fatality car accidents.

In Washington liability is determined by “Contributory Fault” meaning each person is charge proportionately for their percentage of fault.*


In 2013 the average wrongful death claim judgement for a child was $1,525,000

In 2013 the average wrongful death claim judgement for a single person was $792,000

In 2013 the average wrongful death claim judgement for a married person was $2,500,000


Putting an umbrella policy in place could protect you and your family from the financial repercussions of the above incidents and many more for as little as a few dollars a month.

Courts can garnish up to 25% of the wages of both a husband and wife until age 65 to provide restitution!   Home equity over $125,000, investment accounts and most all of your personal property is also at risk.





This article was written by Stacey A Scott, Farmers Insurance, Presidents Council Agent and Broker at Madison Avenue Insurance Group of Woodinville, WA. www.madisonaveins.com www.farmersagent.com/sscott Phone: 425-481-1430. 

*Judgement amounts provided by local law firm McCandlis & Brown.  The above verdicts are results of NW Personal Injury litigation.  Fatality Accident information from the US Dept of Transportation.