Umbrella liability insurance

Umbrella liability insurance refers to liability insurance that is in excess of specified other policies and also potentially primary insurance for losses not covered by the other policies. Personal umbrella policies are typically made excess of a person's home insurance (or tenant insurance), auto insurance and boat insurance. If you are sued, and the total costs are more than your existing liability coverage, the umbrella coverage protects you.

This sort of insurance is commonly, but not exclusively, sold to high net worth individuals, and can cover multiple homes and vehicles. It can also cover costs for libel and slander lawsuits.

Buying umbrella insurance
Examples of situations where umbrella insurance may be needed or desired are:
 * Owning property outside of Canada, or owning multiple properties
 * Owning a swimming pool, hot tub, snowmobile, recreational vehicle or trampoline
 * Being a member of a non­-profit organization's board of directors, or a volunteer
 * Traveling the world frequently for business or leisure
 * Hosting large parties

Another scenario frequently mentioned on the Financial Wisdom Forum (FWF) is driving a rental car, or your own car, in the litigation-prone USA. Although you could increase the liability limit on your auto insurance, or add a rider for rental cars if not already covered, you may find out that an umbrella policy could be a cost-effective substitute, or allow greater total liability coverage.

Umbrella liability insurance is typically sold in multiples of $1M of coverage. You normally buy it from the same insurance company already providing home and/or auto coverage, although not all companies offer this coverage.

Costs
Umbrella coverage can be relatively inexpensive, for example one FWF member was quoted additional premiums of "$119 for a $2M umbrella, and $182 for a $5M umbrella" in late 2016. This required the member to have $1M liability on both car and home insurance.

Another FWF member contacted a different insurer in early 2017 and was quoted a premium of $160 on a $2M umbrella. However, he was first required to increase the liability limit to $2M on his auto insurance, for an additional $94 per year (his liability limit on home insurance was already $2M).

Statistics
The following table shows some statistics from the Office of the Superintendent of Financial Institutions about umbrella liability insurance for years 2015 to 2019: