Umbrella Insurance Beyond Your Limits

Umbrella insurance is surprisingly affordable. Average costs in Nevada:

• $1 million coverage: $150-300 per year ($12-25/month)
• $2 million coverage: $300-450 per year ($25-38/month)
• $3 million coverage: $400-550 per year ($33-46/month)
• $5 million coverage: $500-700 per year ($42-58/month)

The cost is low because umbrella policies only pay out after your primary insurance limits are exhausted, making large claims relatively rare.

Tip: Bundling umbrella insurance with your auto and home policies typically saves 5-15% on premiums.

To qualify for umbrella insurance, you must maintain minimum liability limits on your underlying policies:

Auto Insurance Requirements:

• $250,000/$500,000 bodily injury liability (most common requirement)
• $100,000 property damage liability
• Some insurers require $300,000/$500,000 or $500,000 combined single limit

Homeowners Insurance Requirements:

• $300,000 personal liability coverage (minimum)
• Some insurers require $500,000

Why These Requirements? Umbrella insurance only kicks in after your primary policy limits are exhausted, so insurers want to ensure you have adequate base coverage first.

Note: If you currently have state minimum coverage, you'll need to increase your limits before adding umbrella insurance. This typically adds $200-500/year to your combined auto/home premiums but is required for the umbrella policy.

Personal umbrella insurance does not cover business activities. It only covers personal liability claims.

Not covered under personal umbrella:

• Business operations and commercial activities
• Professional services (medical malpractice, legal services, etc.)
• Commercial vehicles used for business
• Employment-related claims (wrongful termination, harassment)
• Business property damage or liability

If you own a business, you need:

• Commercial umbrella insurance for business liability
• Professional liability insurance (E&O) if you provide services
• Directors & Officers (D&O) insurance if you serve on boards

Exception: Some personal umbrella policies may cover small-scale home-based businesses (under $5,000-10,000 annual revenue), but always verify with your insurer before assuming coverage.

While umbrella insurance provides broad coverage, it has important exclusions:

Common Exclusions:

• Intentional acts – Damage you cause on purpose is never covered
• Business/professional activities – Requires commercial umbrella or professional liability
• Damage to your own property – Only covers liability to others
• Criminal acts – DUI, assault, fraud, and illegal activities
• Contractual liability – Obligations you assume under contracts (unless specifically covered)
• War or nuclear hazards – Standard exclusion in all policies
• Liability covered by workers' compensation – Employee injuries require workers' comp

Property-Specific Exclusions:

• Flood damage (requires separate flood insurance)
• Earthquake damage (requires separate earthquake coverage)
• Aircraft or watercraft over certain sizes (may require specialized policies)

A common rule of thumb is to purchase umbrella coverage equal to your total net worth (assets minus debts).

Calculate your recommended coverage:

1. Add up your assets: home equity, savings, investments, retirement accounts, vehicles
2. Subtract your debts: mortgage balance, loans, credit cards
3. The result is your net worth and suggested umbrella coverage amount

Coverage examples by situation:

• $1M coverage: Young families, moderate home equity ($100-300K), limited savings
• $2M coverage: Established families, significant home equity ($300-600K), retirement accounts, teen drivers
• $3-5M coverage: High earners, substantial assets, multiple properties, business owners
• $5M+ coverage: High net worth individuals, large investment portfolios, multiple properties

Consider higher limits if you:

• Own rental properties (higher liability exposure)
• Have teenage drivers (higher accident risk)
• Expect significant future earnings (protect future income potential)
• Serve on boards or volunteer in leadership roles
• Own dogs, pools, trampolines, or other liability risks

No, you typically cannot purchase umbrella insurance without underlying auto or homeowners/renters insurance. Umbrella policies are designed to provide excess liability coverage, meaning they only pay after your primary policies' limits are exhausted.

Minimum requirements (varies by insurer):

• Most insurers require both auto and homeowners/renters insurance
• Some insurers allow umbrella with just auto insurance if you rent and don't own a home
• Renters can usually purchase umbrella if they have renters insurance + auto insurance

Why this requirement exists:

Umbrella insurance is an "excess" policy, not a standalone product. It's designed to cover liability beyond what your base policies already cover. Without underlying coverage, there's no foundation for the umbrella to build upon.

Best approach: Bundle your auto, home/renters, and umbrella insurance with the same carrier. This usually results in multi-policy discounts of 15-25% and simplifies claims if you ever need to file.