Who it’s for
- Business owners with a home, cottage, vehicles and savings to protect
- Families with teenage drivers, boats, a pool or a rented cottage
- Owners of rental properties, whether held personally or through a company
- Anyone who sits on a board or volunteers in a role with legal exposure
What an umbrella policy does
Your home, auto, cottage and boat policies each carry a liability limit. A personal umbrella sits on top of all of them. If you’re sued for more than an underlying policy’s limit, the umbrella pays the rest, up to its own limit. Some umbrellas also cover certain claims the underlying policies don’t, such as some types of libel or slander claims, though that varies by wording.
It covers your liability to other people. It doesn’t cover your own house or car.
Why business owners need one
Business owners are more likely to be named in a lawsuit and have more to lose. A serious car accident with a teenager behind the wheel, a guest hurt on the dock at the cottage, a tenant injured on the stairs of a rental unit: any of these can produce a claim larger than a standard home or auto limit. Without an umbrella, the difference comes out of your savings, your investments or your shares in the business.
Limits have to line up
Every umbrella comes with underlying requirements: minimum liability limits the umbrella insurer expects on each policy below it. Your auto policy might need to carry a set amount, your home and cottage another, and your boat another. The umbrella also needs to know about every property, vehicle and watercraft you own.
This is where the gaps between policies come from. A business owner often has six or more policies, written at different times, sometimes with different insurers or brokers. One gets renewed at a lower limit. A boat is bought and added to the cottage policy but nobody tells the umbrella insurer. A cottage starts renting on VRBO.
What happens when they don’t line up
Here’s a hypothetical. Your umbrella requires a certain liability limit on your auto policy. Your auto policy actually carries less. After a serious accident, the umbrella doesn’t drop down to fill that difference. It starts paying only where the required limit would have stopped. The gap in between is yours to pay.
The same thing happens when a vehicle, property or watercraft isn’t scheduled on the umbrella at all. It may not respond.
Rentals, cottages and holding companies
Rentals are where personal umbrellas get tested:
- A rented cottage must be disclosed to the umbrella insurer, and the cottage policy must carry the required limit.
- A rental property in your own name may be covered if it’s listed and meets the underlying requirement.
- A property owned by a holding company usually falls outside a personal umbrella entirely. It needs its own liability limit, and often a commercial umbrella.
Where your business and family policies overlap
A personal umbrella is written for personal liability. It generally excludes your business activities, and often company-owned vehicles. So a business owner needs two layers: a personal umbrella over the family’s policies, and a commercial umbrella or excess policy over the business’s general liability and commercial auto. The common failures:
- The company truck the family drives on weekends is on the commercial auto policy, but its limit doesn’t match the commercial umbrella, or there isn’t one.
- A home office with client visits isn’t disclosed, so the personal side assumes there’s no business.
- A holdco-owned rental is left off both umbrellas because each side assumed the other had it.
Steve lists every policy you hold, personal and business, in one place: limits, named insureds, and what the umbrella requires underneath. Then he looks for the holes.
How Steve works on this
Steve walks you through how your umbrella fits over each policy and explains where it falls short. He gives you options from more than 20 insurers and tells you what limit he’d carry in your shoes. Each renewal, he calls to ask what’s new: a driver, a boat, a property, a rental, a new board seat.
If you aren’t sure your policies line up under your umbrella, that’s exactly what a review is for.
Common questions
What does a personal umbrella policy cover?
It pays liability claims above the limits of your underlying policies, such as home, auto, cottage and boat. Some umbrellas also cover certain claims the underlying policies don't. It does not cover damage to your own property.
How much umbrella coverage do I need?
There's no formula. Look at what you own, what you earn, how many drivers and properties you have, and whether you rent anything out, then compare that with what a serious lawsuit could cost. The right number is a judgment call worth making together.
Does my personal umbrella cover my business?
Generally not. A personal umbrella is written for personal liability and usually excludes business activities, and often company-owned vehicles. Your business needs its own excess or umbrella liability on its commercial policies.
What are underlying limits?
They're the minimum liability limits the umbrella insurer requires on each policy underneath, for example a set amount on your auto and home policies. If one of your policies carries less, you can end up paying the difference yourself.
Does an umbrella cover my rental property or rented cottage?
Sometimes, but only if the umbrella insurer knows about it and the property's own policy carries the required limit. Rentals held through a holding company usually aren't covered by a personal umbrella at all.
Do I need my home and umbrella with the same insurer?
Some insurers require it, others don't. What matters is that the umbrella insurer knows about every property, vehicle and watercraft, and that each one meets the umbrella's underlying requirements.