Most people have a general liability policy through their home insurance coverage. While this coverage is comprehensive enough for many homeowners, it may not be enough to suit everyone.

A personal umbrella liability policy covers liability incidents that reach their limits. For example, say your home insurance policy maxes out at $1 million. Your child has a friend come over to play on the trampoline. About half an hour later, your child’s friend flies off the trampoline and lands on their head, resulting in a concussion and paralysis from the neck down. You call 911 and the child is rushed to the hospital. The child’s parents are understandably upset, and they sue you for compensation for their child’s medical bills, including disability. In total, including court costs and lawsuit expenses, the incident demands $2 million in payment. Since your home insurance policy only covers $1 million, a personal umbrella policy will cover the remaining $1 million. 

Since umbrella liability insurance is designed to cover such large expenses, many people think that it must be an expensive policy. On the other hand, umbrella liability insurance is relatively inexpensive. For a $1 million umbrella liability policy, you may pay only $150 to $300 a year. 

This cost can depend on a variety of factors: 

Lifestyle 

As with other liability insurance policies, umbrella insurance is calculated based on how likely you are to file a claim. Certain lifestyles and activities may put you at large risk of an expensive lawsuit. If you frequently host large parties, own a pool or trampoline, or travel a lot, you may be at a larger risk for a lawsuit. 

Vehicle Aspects 

A personal umbrella liability policy covers all of your personal forms of liability insurance, including the liability coverages on your vehicles. Sports cars, expensive vehicles and recreational vehicles like motorcycles may need higher limits of umbrella insurance and thus cost more. 

History of Claims 

If you have a history of being involved in lawsuits, you will likely have to pay more for insurance in order to cover potential claims. This can apply if you’ve made claims on your car insurance policy’s liability coverage or your home’s liability coverage. 

Location 

Location can be a large factor when it comes to the cost of your insurance. If you live in an expensive area or an area with a high cost of living, you may pay more for insurance.