Coverage limits are normally available at $500,000, $300,000, $1 million, and $2 million, and apply to anyone who is living in a household or who is insured by the primary or underlying policy. The premiums for $1 million of coverage can range between $150 and $300 depending on what is included on the policy.


An umbrella liability insurance policy is available for situations where a legal award or judgment is above the liability coverage or above a primary or underlying policy. Individuals who are sued who have an umbrella liability policy in place have their defense costs paid by the umbrella policy, with lawyers typically provided by the insurance company. An umbrella policy can also pay for other types of claims that are not covered by underlying insurance or other policies that are in force.


Insurers base the rates for an umbrella liability policy on factors that include the state of residence and the amount of liability exposures that exist such as a car or an airplane. Other factors that affect the rates for an umbrella liability policy include the number of policyholders or insureds that an insurer has for a particular policy. This is because having more insureds that are covered by a particular policy means there are more premium payments being made than are being paid out in claims.


Purchasing an umbrella policy may depend on the criteria of the insurance company that provides the policy. Many insurers require that an automobile and homeowners policy be purchased or in force before an umbrella policy is issued. Some insurers may also require a minimum amount of coverage on a policy, such as $300,000 or $500,000, depending on the minimum limits that have been set by the insurance company.


Most umbrella liability insurance policies come with restrictions or exclusions that apply, just like any other insurance product. This includes intentional acts of an insured that result in damage or punitive damage awards that result from a lawsuit. An umbrella liability policy will also not provide coverage for damage caused by a business run by an insured.

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