Personal liability umbrella insurance from State Farm is a type of excess liability coverage that extends the protections of a standard car or home insurance policy to protect your assets from a wider range of liability claims.
Umbrella insurance is a good idea for anyone with a high net worth or parents of teenagers and young children who want to protect their financial future. But is it the right move for you and your family? Let’s review State Farm’s umbrella insurance offerings to determine if you should add this extra coverage to your car insurance
or homeowner’s
policy. What is an umbrella insurance policy?
An umbrella insurance policy—also known as a personal umbrella policy (PUP)—extends your personal liability insurance
beyond the limits on your auto insurance or homeowners insurance policy. Umbrella insurance also covers things that a standard liability policy typically won’t, such as mental anguish. Liability coverage
on an umbrella policy starts at $1,000,000, but you can raise it in $1 million increments to as high as $5 million or $10 million, depending on your insurance company. Compared to the typical limit of $300,000 or $500,000 on a regular home or auto insurance policy, that’s significantly more coverage—for an average annual cost of $150 to $300. Since you can only buy umbrella coverage once you’ve met the required liability limit for car or home insurance, it only kicks in after the payments from your underlying insurance is exhausted.
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How does umbrella insurance work with State Farm?
State Farm offers personal liability umbrella insurance to policyholders who have met the required liability limits on all underlying policies, such as automobile insurance and homeowners insurance or rental property insurance
. While State Farm doesn’t have its minimum liability requirement made public, the typical requirement is a CSL (combined single limit) policy of $300,000 or split limit policy with $250,000 bodily injury liability per person, $500,000 bodily injury per occurrence with $100,000 of property damage liability coverage.
What does State Farm umbrella insurance cover?
Umbrella insurance coverage from State Farm extends to situations and losses that regular auto liability protection excludes, such as:
Libel, slander, and defamation
Mental anguish and personal psychological harm
Legal defense costs for covered losses
Overseas liability protection for travelers
State Farm’s umbrella coverage will also cover medical expenses and repair bills for other people that go beyond the coverage limits of your regular home or auto insurance.
Let’s take an example. Say you’re driving home for the holidays and you change lanes without checking your mirror, causing a crash that snowballs into a four-car pile-up. As the at-fault driver,
you’re responsible for covering the costs of all the drivers who were injured, along with their passengers’ medical bills and their vehicle repairs. A standard car insurance policy from State Farm includes bodily injury liability
and property damage liability insurance
that can cover up to $300,000 per accident in medical bills or vehicle repairs for other drivers. But the medical bills for all three other drivers and their passengers come out to over $420,000, and two of the three vehicles you hit were totaled—including a brand-new Tesla! You’ve hit your liability limit, and without umbrella insurance, the other drivers can file personal injury lawsuits against you to extract the remaining damages. To make matters worse, one of the passengers in the crash sustained a disfiguring injury. In addition to his initial medical bills, he’s now suing you for the mental anguish caused by your momentary slip-up on the highway. Your standard liability insurance wouldn’t cover this even if you hadn’t hit your limit—only umbrella insurance can protect you from this situation.
MORE: How different types of car accidents affect your insurance rates
What it won’t cover
But as great as this protection is, umbrella insurance won’t cover everything. The following exclusions will apply to your State Farm umbrella policy:
Your own injuries or property damage
Anything already covered by a legal contract
Let’s say you’re taking a bath with scented candles one evening to relax and unwind. But you lit too many candles—one of them catches on the edge of a curtain and starts a fire that spreads quickly. It ends up damaging the house next door, and their repair costs exceed the liability limits on your homeowners insurance.
If you have an umbrella insurance policy, the higher limits should cover your neighbor’s costs—but now let’s say that instead of a calming bath, you were testing candles for your home candle-making business. Because your business activity started the fire, only business insurance can cover it.
MORE: How to choose the right kind of home insurance for you
How much does State Farm umbrella insurance cost?
The exact cost of umbrella insurance varies from person to person based on risk levels and other factors, but here’s the good news: it’s almost always relatively inexpensive.
The average cost of umbrella liability insurance is between $150 and $300 per year. That’s as little as $12.50 per month!
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In order to buy a personal umbrella policy from State Farm, you’ll need to have an underlying policy, such as car, home, renters, or watercraft insurance—and you’ll need to have reached the maximum liability limit on that policy.
Umbrella insurance isn’t available in every state. State Farm customers in New York
, Massachusetts
, and North Carolina
can’t purchase umbrella coverage. But if you live in another state, you should consider whether this coverage is right for you, especially if: You have a high net worth
You have a swimming pool, trampoline, swingset, or tree house on your property
You have teenage drivers
in your household You have children of any age that you are legally responsible for (from your toddler biting someone on the playground to the party your college kid threw while you were out of town—you may need an umbrella policy)
MORE: How to get cheap car insurance for young drivers
Is a State Farm personal liability umbrella policy worth it?
A State Farm umbrella policy offers great protection, but is it really worth it? Let’s break down the advantages and disadvantages of purchasing this additional coverage.
Pros
…it’s fairly affordable. Buying umbrella coverage usually adds between $12.50 and $25 a month to your overall insurance costs.
…it comes with higher limits. The average cost of a hospital stay after a car accident is $60,000 and the average value of a vehicle on the road today is $48,000. Without umbrella coverage, you could face steep out-of-pocket expenses from a single accident.
…it protects you against things regular auto or home insurance won’t touch. For example, the cost of a legal defense against slander or mental anguish could drain your finances and eat up your future if you don’t have umbrella coverage.
Cons
…it costs more. Even though the actual cost of adding umbrella coverage to your policy is fairly low, you need to meet high coverage limits first, making it a better option for policyholders who already carry high liability limits.
…not everyone can get it. Depending on where you live, various risk factors, and prior loss history, you might not be eligible to add umbrella coverage to your policy.
…it won’t cover your own injuries or property damage. Umbrella insurance’s higher limits won’t touch any of your own expenses, so property damage insurance like collision
or comprehensive coverage
might be a better choice if you only have minimum coverage. The bottom line
If your liability limits are less than your total assets, buying a State Farm umbrella policy is a great way to protect your financial future.
But if you haven’t met the liability limits on your policy or don’t yet have property damage insurance, work on building up your coverage before you invest in umbrella insurance.
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