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Overpaying on car insurance?

State Farm Umbrella Insurance

state farm umbrella insurance
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The liability coverage you can get from standard car or home insurance policies may prove insufficient in the event of a major insurance claim or lawsuit against you. By purchasing State Farm umbrella insurance, you can get the the additional liability coverage you need to safeguard your assets and financial future. In case you accidentally injure anyone or cause damage to someone’s property, the policy will provide you with additional liability coverage.

What Is State Farm Insurance?

Founded in June 1922, State Farm Insurance is a large mutual insurance company with headquarters in Bloomington, Illinois. With its business operations spread throughout the United States, the company offers a range of personal and business insurance products. These include auto, homeowners, condo owners, renters, small business, life, medical supplement, hospital income, and pet insurance. You can bundle different policies together to save money, such as buying auto insurance with homeowners insurance, life insurance, health insurance, or small business insurance.

What Is State Farm Umbrella Insurance?

State Farm umbrella insurance is also known as personal liability insurance and it provides liability coverage against personal claims, such as slander, libel, or defamation of character. Such coverage is generally not included in your existing auto, homeowners, boat, or other insurance policies. The umbrella insurance policy is available at an affordable price and offers a minimum coverage of $1 million for covered claims.  You can increase this coverage in increments of $1 million.

If someone sues you for injuries or damage and you are found to be at fault, the umbrella insurance policy will help pay what you owe together with your legal fees. For example, if you have a $1 million umbrella insurance policy and someone sues you for that amount, the insurance company will pay it and also cover the fees for your legal defense. Some policies may have a retained limit that you must pay before your coverage begins to pay out. Different umbrella policies will have different details and exclusions.

What Does Umbrella Insurance Cover?

Umbrella insurance provides coverage against legal claims in which you are at fault for causing personal injuries to other people and damaging other people’s properties.

  • Example 1: You might have a driving accident that injures the other driver and damages their vehicle. Since you caused the accident, you are legally obliged to pay for the other driver’s medical and car repair expenses.
  • Example 2: You are burning leaves in your backyard, and the fire spreads to your neighbor’s yard and burns their shed. Now you have to pay for the shed and any injury they might have sustained in putting out the fire.
  • Example 3: You are operating your boat and collide with a water skier. You have to pay for the damage to the water skis and the skier’s medical expenses.
  • Example 4: Your house guest falls down your steep stairway and breaks her arm. You have to pay for her medical expenses and the loss of earnings while her arm is healing.

These costs might exceed the coverage you get from your regular auto insurance, home insurance, personal insurance, or boat insurance, and could wipe you out financially if you had to pay out of pocket. Fortunately, with an umbrella insurance, you and your family members are covered for these types of situations. You also get liability coverage for rental property and a range of other legal claims such as defamation and false imprisonment. The State Farm umbrella insurance policy will pay damages up to your liability limit and cover the associated legal expenses over that limit.

How Umbrella Insurance Works

After you purchase an umbrella insurance policy,  the liability coverage will cover you if you are legally held responsible for causing injury to someone or damaging someone’s property. You will get coverage for the difference between what your basic insurance covers and what you might owe to the other party.

Example of Umbrella Insurance

To understand how State Farm umbrella insurance works, let us consider the following situation:

You have a car accident in which you damage the other vehicle and injure its driver and passengers. The repairs for the damaged vehicle cost $30,000, and the medical expenses for treating the injured people come to $3,00,000. Since the other driver broke her arm and cannot work for at least the next six months, she sues you for $2,50,000 in lost earnings. As the person who caused the accident, you have the legal obligation to pay all these expenses, which amount to a total of $5,80,000.

You have a liability limit of $300,000 on your auto insurance policy. The amount you owe is higher than this. If you do not have a personal liability umbrella insurance policy, you would have to pay $2,80,000 out of pocket and that could devastate you financially. Fortunately, with a $1 million umbrella insurance, you can remain on safe ground. The insurance company will also provide coverage for any of your legal costs in the lawsuit.

What Umbrella Insurance Does Not Cover

Aside from specifically stated exclusions, you can get broad coverage from the State Farm umbrella insurance policy. However, the liability policy will not cover the expenses arising from your own injuries or the damage to your own property. You will also not get insurance coverage for the liability associated with the following:

  • Your business or professional activities
  • Your breach of a signed contract
  • Any damage that you or your family members deliberately cause

Should You Get an Umbrella Insurance?

You might want to get umbrella insurance for the following reasons:

  • You have a high net worth and an active social life that puts you at a higher risk than average.
  • You are the sole provider for your family, and you do not want your family finances impacted in case an untoward event occurs.
  • You have teenagers and are financially responsible for any accidents they cause.

What Is the Cost of an Umbrella Insurance Policy?

The cost of an umbrella insurance policy will be different for different people depending on their personal situation. Most umbrella insurance policies offer coverage between $1 million and $5 million, but some may go higher. Depending on the policy you buy, the price is generally a few hundred dollars per year.

Since an umbrella insurance policy is affordable and offers broad coverage for various situations, it is a good idea to buy it and protect yourself from financial loss even if you are a careful, low-risk person.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.

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About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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