Three Hundred Dollars a Year

A friend of mine rear-ended a woman on the highway last year. His fault. Low speed. He thought it was a fender bender.

Her medical bills came to $420,000. His auto insurance covered $300,000. That was his limit. The other $120,000 came out of his savings.

He wrote that check from the account he’d spent 30 years filling.

The next morning I called my insurance agent. One question. “If that happened to me, what would I owe?”

She said, “With what you have? Nothing. Your umbrella covers the gap.”

I pay $310 a year for that policy. My friend paid $120,000 for not having one.

It’s extra coverage that sits on top of your auto and home insurance. When a claim goes past the limits on those policies, the umbrella kicks in and pays the rest.

It covers lawsuits from car accidents, injuries on your property, dog bites, and most personal situations where someone sues you. It also pays for your legal defense, which can cost six figures on its own.

A million dollars of protection for about $300 a year. That’s $25 a month. Less than a streaming service. And fewer than one in five households carry one.

▸ You own a home. Someone slips on your driveway. Breaks a wrist. Sues you. Your home insurance might cover $300,000. The lawsuit is for $600,000. The umbrella covers the rest.
▸ You have savings or investments. Without an umbrella, a judge can go after your assets to pay a judgment. Your retirement accounts, your brokerage account, your house. The umbrella stands between the lawsuit and your money.
▸ You have a pool, a dog, or a teenage driver. These are the three things that raise your risk the most. If any of them are part of your life, an umbrella isn’t optional. It’s the floor.
▸ You rent out property. A tenant gets hurt. A guest falls down the stairs. Your landlord policy has limits. The umbrella extends them.

A $1 million policy runs $150 to $400 a year in 2026. The average is about $300 to $375. Each extra million costs $75 to $150 more. So a $2 million policy might run $450 to $550 a year.

The rule of thumb: carry at least as much umbrella coverage as your net worth. If you have $1.5 million in assets, get a $2 million umbrella. It costs less than dinner out once a month.

One catch. Most insurers require you to carry higher limits on your auto and home policies before they’ll sell you an umbrella. Usually $300,000 to $500,000 in auto liability. That might bump your auto premium by $50 to $100 a year. Still worth it.

He didn’t know this policy existed. His insurance agent never brought it up. He found out about umbrella coverage from a lawyer, after the lawsuit was filed.

That’s the thing about this policy. Nobody sells it hard because the commission is tiny. A $300 policy doesn’t make an agent rich. So they don’t mention it unless you ask.

Ask. Call your agent today. Say, “Do I have an umbrella policy?” If the answer is no, get one. It takes 15 minutes and less than a dollar a day.

My friend spent 30 years building his savings. He lost $120,000 of it in a single afternoon because nobody told him about a $300 policy.

Don’t be my friend. Be the guy who made the call.

— Walter