# Umbrella insurance

> Umbrella insurance defined: extra liability coverage that pays after your car or home insurance limits run out, how it works and who tends to consider it.

Canonical page: https://statecover-guide.com/glossary/umbrella-insurance/  
Last reviewed: October 28, 2026 by the StateCover Guide editorial team  
General information, not legal or insurance advice.

## Quick answer

Umbrella insurance is a separate liability policy that adds protection above the limits of your underlying policies, such as auto and homeowners insurance. It pays only after those underlying limits are used up.

## How it works

The NAIC describes personal umbrella and excess coverage as non-business liability protection above the amount set in a basic policy. The Insurance Information Institute adds that these policies pay when your underlying coverages are exhausted.

Example: your auto policy pays up to $100,000 for one person's injuries, and you cause a crash that leads to a $350,000 judgment for one injured person. Your auto policy pays $100,000. A $1 million umbrella policy could pay the remaining $250,000, so it does not come out of your own pocket.

Things to know:

- **Liability only.** It pays for injuries and damage you cause to others, not for your own car or your own injuries.
- **Underlying limits.** Ask the umbrella insurer what liability limits it requires on your auto and home policies.
- **Where to buy.** The III suggests that if your home and auto insurance are with the same company, you check that company's price first.

## Who considers it

The III warns that if you are found responsible for more than your insurance covers, you have to pay the difference yourself. That risk is the main reason people with savings, a home or other assets to protect consider an umbrella policy on top of higher auto liability limits.

## Related terms

- [Liability limits](https://statecover-guide.com/glossary/liability-limits/)
- [Liability insurance](https://statecover-guide.com/glossary/liability-insurance/)
- [Bodily injury liability](https://statecover-guide.com/glossary/bodily-injury-liability/)
- [Primary and secondary coverage](https://statecover-guide.com/glossary/primary-and-secondary-coverage/)
- Guide: [Liability car insurance explained](https://statecover-guide.com/coverage/liability/)

## Sources

- [NAIC, Glossary of insurance terms](https://content.naic.org/glossary-insurance-terms) — definition of personal umbrella and excess coverage
- [Insurance Information Institute, How much auto coverage do I need?](https://www.iii.org/article/how-much-auto-coverage-do-i-need) — umbrella policies pay after underlying coverage is exhausted; paying amounts above your limits