Umbrella Insurance
Definition
A type of personal liability insurance that provides coverage beyond the limits of your existing homeowners, auto, or watercraft policies, protecting against large claims and lawsuits.
Umbrella insurance acts as an extra layer of liability protection that kicks in when the limits of your underlying policies are exhausted. A standard homeowners policy might cover $300,000 in liability — an umbrella policy adds $1–5 million on top of that.
This type of coverage is particularly important for individuals with significant assets, investment portfolios, or rental properties. Without it, personal assets including investment accounts, savings, and real estate could be at risk in a lawsuit.
Umbrella policies are relatively affordable — typically $150–$400 per year for $1 million in coverage — because they only pay out after other insurance limits are reached. They cover scenarios like serious car accidents where damages exceed auto policy limits, injuries on your property beyond homeowners coverage, and defamation or libel claims.
For high-net-worth individuals tracked in Clarity, umbrella insurance is a foundational risk management tool that protects the portfolio you've built.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Frequently Asked Questions
How much umbrella insurance do I need?
A common guideline is to carry umbrella coverage equal to your net worth. If your total assets (home equity, investments, savings) total $2 million, a $2 million umbrella policy helps ensure a lawsuit can't wipe out your wealth.
What does umbrella insurance NOT cover?
Umbrella policies typically exclude damage to your own property, intentional acts, business-related liabilities, and contractual obligations. They're strictly for personal liability claims made against you by others.