What are the prerequisites for umbrella coverage?

Typically requires minimum liability limits on underlying policies (often $250,000/$500,000 for auto and $300,000 for home) and good insurance history.

Umbrella coverage is a type of insurance that provides extra liability protection beyond the limits of your standard policies such as auto, home, or boat insurance. To qualify for umbrella insurance, insurers usually require you to have certain minimum liability limits on these underlying policies. For instance, for auto insurance, you might need to have liability limits of at least $250,000 per person and $500,000 per accident. Meanwhile, for homeowners insurance, a common requirement is a liability limit of at least $300,000. These underlying policies act as your first line of defense in liability situations. Additionally, insurers prefer that you have a good insurance history, which means you’ve maintained continuous coverage without significant gaps and have not been frequently filing claims. This history demonstrates to the insurer that you're a low-risk policyholder, increasing your chances of eligibility for umbrella coverage.

Imagine that John owns an automobile and a home. He drives safely and has an auto policy with liability limits of $250,000 per person and $500,000 per accident. John also has a homeowners policy with a $300,000 liability limit. Because he wants to ensure he's protected against any unforeseen major claims, like a serious car accident that could result in higher injury costs than his auto insurance covers, he applies for umbrella coverage. His current policies meet the minimum requirements, and his clean insurance record reassures the insurer, allowing him to obtain a $1 million umbrella policy that provides extra security and peace of mind.

If you're considering adding umbrella coverage, start by reviewing your existing insurance policies to ensure they meet the typical minimum liability limits required by most insurers. Next, check your current insurance history—try to maintain continuous coverage and avoid frequent claims to demonstrate reliability to your insurer. Speak with your insurance agent to understand the specifics of your coverage needs and to help you adjust your underlying policies, if necessary, to qualify for an umbrella policy. Remember, having umbrella insurance can provide significant peace of mind by protecting your assets against unexpected, large liability claims, so it's often worth the small extra cost.