Umbrella coverage above your auto policy

Why it's cheap

The umbrella only pays after your auto or home liability limit is exhausted, which is rare. Because it sits above a substantial layer, insurers can offer large amounts for a modest premium.

That's the whole proposition: the coverage most likely to save you from a catastrophic outcome is also among the least expensive per dollar.

The requirement that catches people

Umbrella insurers require you to carry specified minimum liability limits on the underlying auto and home policies. If you don't, they'll require you to raise them.

That means an umbrella can cost more than the quoted premium — the underlying increases are part of the price. Get both figures before comparing.

It also means a gap: if you later reduce an underlying limit, the umbrella may not respond as expected. Don't lower underlying limits without checking.

What it typically covers

• Auto liability above your auto policy limits
• Home and personal liability above your homeowners or renters limits
• Liability arising from rental property you own, on many policies
• Some policies extend to defamation, libel and slander claims
• Defence costs, often in addition to the limit

Who should have one

• Anyone with assets that exceed their auto liability limits — which is most homeowners
• Households with teen drivers, where the exposure is higher
• Owners of rental property
• Anyone with a pool, trampoline, dog, or who hosts frequently
• People with future earnings worth protecting, which courts can reach in some states

What it doesn't do

It doesn't cover damage to your own property, your own injuries, or business liability arising from a business you run — those need their own coverage.

And it doesn't fix an underlying policy that excludes the activity. If your auto policy excludes delivery driving, the umbrella above it generally won't respond either.