Should Rich People Add Umbrella Coverage to Their Car Insurance Policies?

Last Updated on November 28, 2019

If you’re wealthy, you’re going to have more options when it comes to choosing a car insurance policy, since you won’t be limited by budget. However, you may have a more expensive or valuable vehicle to protect. One option to consider if you are a high-net-worth individual is umbrella coverage for your car insurance policy. There are benefits to adding this type of coverage to your policy, but it may not be the right move for everyone. Here’s what you need to know about umbrella coverage before you purchase it.

Should rich people add umbrella coverage to their car insurance policies?

What Is an Umbrella Policy?

Umbrella coverage is designed to protect you in the event that someone makes a very large liability claim against you, or tries to sue you. As a wealthy person, you may be more likely to be a target of a large liability claim after a car accident. If you add umbrella coverage to your policy, it will cover extremely large claims of bodily injury and property damage far above what a traditional car insurance policy would cover. You can also purchase umbrella policies for other types of insurance, like home insurance.

Umbrella policies will only take effect if the limits of your initial policy are reached. You’ll need to have a car insurance policy already to purchase umbrella coverage – you cannot buy it on its own. If you’re held liable for $500,000, for example, but your car insurance only covers $250,000 worth of damages, then your umbrella policy will kick in.

Advantages of Umbrella Coverage

The biggest advantage of having umbrella coverage is simply that it will give you peace of mind. If you get into a car accident that causes the other person serious bodily harm or property damage, your average car insurance policy probably isn’t enough to cover it. If you have umbrella insurance, you won’t have to worry about how you’ll come up with the money should you get into a situation like this.

This is particularly important if you are a rich person – if the other party in a car accident finds out about your financial status, they may feel more compelled to file a lawsuit simply because they believe they will be more likely to get money out of you. If you feel you are a target for frequent lawsuits in general, you can purchase personal umbrella coverage, which will cover lawsuits for bodily injury or property damage in a much broader range of circumstances.

Umbrella coverage is also typically very affordable and easy to add to your policy. In most cases, all you’ll need to do is talk to your insurance agent and they can add this coverage to your policy quickly. Umbrella coverage usually only costs $200-300 per year, so it’s relatively affordable when spread out over monthly payments. The reason that umbrella coverage is so affordable is that the chances of you actually using it are fairly low. Even if you are more likely to be a target for a lawsuit than other people, it’s still rare that you would need to file a claim with umbrella insurance.

The Disadvantage of Umbrella Coverage

There are a few disadvantages to using umbrella coverage for your car insurance. If you’re particularly concerned about someone filing a lawsuit against you, these likely won’t be dealbreakers. However, it’s still very important to be aware of these potential disadvantages. The biggest factor to be aware of is that umbrella coverage doesn’t cover all instances of liability. For example, if you intentionally hurt someone or commit a crime, the umbrella coverage won’t pay for your legal responsibilities. It’s also important to note that umbrella policies will not cover any losses related to your business or to your own personal property – it’s entirely for covering the liability of another party.

Another potential downside to be aware of is that most insurance companies require you to have a certain amount of car insurance coverage before they will sell you umbrella coverage. If you don’t drive often or don’t want to pay the monthly premiums for this much coverage, these limits could be frustrating. However, for those that are already wealthy and may own very valuable cars, this level of coverage is likely going to be necessary and helpful anyway.

The Bottom Line

If you think you may be a likely target for a lawsuit, it’s important to talk to your car insurance agent about umbrella coverage options. Although umbrella insurance is usually marketed to high-net-worth individuals, anyone can benefit from it. It also typically isn’t too expensive to add to your policy. If you are worried about the possibility of financial liability as a result of a car accident, umbrella coverage can give you the peace of mind you need.

James Shaffer
James Shaffer James Shaffer is a writer for and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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