Umbrella insurance for federal families

What it actually is

An umbrella policy is excess liability cover. It sits above your homeowners and auto liability and pays in two situations: when a judgment exceeds the underlying limits, and when a claim is the kind your base policies exclude.

The everyday example: you cause an accident with $900,000 in injuries and your auto liability tops out at $500,000. Your auto policy pays its limit, the umbrella pays the remaining $400,000, and nothing comes from your savings.

It also picks up personal-injury claims such as libel, slander and false arrest, which standard home and auto policies generally do not cover at all.

What it costs

The first million costs the most; each additional million is cheaper, because claims that large are rare. For most federal households this is the highest amount of protection per dollar available anywhere in the insurance market.

The limits you need first

Carriers will not sell you an umbrella on top of thin base policies. Typical minimums:

• Auto liability: $250,000 per person and $500,000 per accident.
• Homeowners or renters liability: $300,000.

If your limits sit below those, raising them is the first step, and it usually costs a modest amount per year. That increase is worth making regardless, because the base policy is what handles the routine claims.

Who needs it

The test is not how much you earn. It is what a court could reach.

• You have real assets. Home equity, a TSP balance, taxable savings. A judgment above your liability limits comes out of those.
• You have future federal earnings. Wages can be garnished. A long career ahead of you is an asset a plaintiff's attorney can see.
• You have teen drivers. The single biggest liability multiplier in most households.
• You host, own a pool or trampoline, or have a dog. Ordinary domestic life, and the source of most large home liability claims.
• You rent out a property after a PCS. Tenants, guests and contractors all create exposure a landlord policy handles only to its limit.

What it does not cover

• Your own injuries or your own property. Umbrella is liability cover, full stop.
• Intentional acts, and anything criminal.
• Business activities, including most side businesses. A side venture needs its own liability cover.
• Professional liability. That is a different product.
• Claims your base policy excluded for eligibility reasons, such as driving an uninsured vehicle.

Buying it properly

• Start with the carrier that writes your home and auto, since bundling is usually cheapest and avoids gaps between layers.
• Compare a standalone umbrella carrier as well, which lets you keep your existing policies where they are.
• Raise your underlying limits to meet the minimum before you apply, and quote both changes together.
• Tell the carrier about every driver, vehicle, property and pet. An umbrella is only as good as the disclosure behind it.
• Ask whether legal defence costs sit inside or outside the limit; outside is better, and it varies by policy.

Common questions