“Do I need an umbrella policy, or are umbrella policies only for rich people?” You know you have entered into that life phase known as “Adulthood” if you have ever uttered those words!

The value of Personal Umbrella Insurance is widely undervalued and misunderstood. Most people understand that it is a policy that adds another layer of protection to your existing policies, like Auto and Home Insurance. However, most people misunderstand who needs personal umbrella insurance.  

Unfortunately, it is a common belief that Personal Umbrella Insurance is for wealthy people who have a lot of assets. But that is certainly not the case. In this article, we will explain why every policyholder should seriously consider adding umbrella coverage to their insurance portfolio.  

We will address the following questions: 

For a more thorough understanding of what Umbrella Insurance is, refer to The Ultimate Umbrella Insurance Guide

Are Umbrella Policies Only For Rich People? 

You may be thinking, ‘People can’t sue me for money I don’t have.’ But in reality, they can.

First, it is important to understand that lawsuits take into account all of your assets, not just your cash. Assets also include investments you’ve made, your house, your car, your electronics, jewelry, and anything else that can be liquidated into cash.  

Second, lawsuits can literally take money you don’t have… yet. If your assets do not cover what the court rules you owe the claimant, the judgment might include garnishing your wages. 

What Is Wage Garnishment?

When it comes to insurance claims, wage garnishment is when a percentage of your current and future income is withheld from your paycheck and sent directly to the claimant. Federal law places a limit to what percentage can be garnished that varies by state and circumstance. However, up to 25% of your disposable earnings can be deducted. That’s potentially a quarter of your income! 

7 Most Common Personal Umbrella Insurance Claims 

As you can see, umbrella insurance doesn’t just cover people who have a lot to lose. The personal value of assets is relative, after all. A laborer who loses the beat-up truck he depends on for work is just as hurt, if not more, than the doctor who loses his Mercedes.  

Let’s review the most common claims against Personal Umbrella policies. 

Legal Costs and Damages 

Whether you win or lose your defense, lawsuits quickly rack up lawyer fees and processing expenses. These legal costs can easily exceed tens of thousands and even hundreds of thousands of dollars. Personal Umbrella coverage will pay for these expenses. 

And let’s say, the judgment rules against you and you are responsible for paying damages that exceed your associated liability limits. In such cases, your Umbrella policy will cover the excess, up to your policy limit.  

It may seem unlikely that damages would exceed your standard liability limits, but it is not unusual. For instance, let’s assume you carry the NC minimum requirements for auto insurance. Your property damage coverage caps out at $25,000, but you totaled a doctor’s Mercedes with an Actual Cash Value of $75,000? How are you going to pay for the $50,000 deficit? 

Teen Drivers 

North Carolina is the third deadliest state for teen drivers. The risk of car accidents is 3x higher among teen drivers than any other age group. These shocking statistics equal high risk, which in turn means high liability. A Personal Umbrella policy gives you more coverage to balance out the high risk.  

Furthermore, auto insurance policies covering teen drivers typically have higher premiums. An umbrella policy may be a cheaper way to add coverage than your primary auto insurance.  

Dog Bites 

Dog bites are one of the 7 Most Common North Carolina Home Insurance Claims. As such, it’s also one of the most common Personal Umbrella claims. North Carolina is one of eighteen states that practice the “one-bite rule.” The one-bite rule means that dog owners are not always held liable the first time their dog bites someone.  

One might think this means NC dog owners are less liable to lawsuits, but that is not the case. The rules change from county to county and even city to city. And, of course, there are exceptions to the rule. One big exception is if the dog exhibited aggressive behavior in the past. Lawyers love to capitalize on what defines “aggressive behavior.” Not to mention, some NC counties consider dogs “dangerous” based on their breed alone, such as pit bulls, rottweilers, and chow chows. “Dangerous dog” owners do not get a second chance. 

False Arrest and Slander 

If you are wrongfully arrested, imprisoned, slandered, or evicted, Personal Umbrella insurance covers you. Not only does it pay toward your legal defense, but also toward efforts to reestablish your good reputation. These types of situations are usually not covered in standard insurance policies.  


They say no good deed goes unpunished, and unfortunately, that’s true sometimes. People who volunteer with a community, charitable, or religious organization are at a higher risk of being sued than others. The most common lawsuits claim negligence or inappropriate behavior. 

Before you volunteer with an organization, make sure they have some form of insurance that can help pay for a related lawsuit against you. If the organization does not have insurance or does not fully cover you, your umbrella policy could save the day. 

Injury on Your Property 

Many of the most expensive lawsuits involve a person getting injured on your property, or by a resident of your household. Whether a neighbor kid hits their head on your pool or the delivery man trips on your porch steps, a lawsuit may likely follow. But it’s not limited to your property lines. If your dog breaks into your neighbor’s yard and mauls their pet or your teenager slanders a teacher online, you can be held responsible for significant damages. 

Most home insurance policies have a minimum coverage of $100,000 for personal liability. But when you add in medical costs, lost wages, property damage, and more, the damages add up quickly. Worst of all, you may be responsible for pain and suffering damages, which require a whole category of their own on this list. 

Pain and Suffering 

Pain and suffering damages might be awarded to those who claim extreme physical and emotional suffering caused by your negligence. Since it is hard to put a dollar amount on pain and suffering, injured parties often try to capitalize on pain and suffering damages.  

Of course, many injuries do inflict significant pain and suffering that is a righteous cause for compensation. But unfortunately, the vague nature of the damages opens it up to abuse. Regardless of right or wrong, pain and suffering claims can skyrocket payouts to injured parties, landing you in hundreds of thousands or even millions in debt. Umbrella insurance can safely glide you back down to earth. 

North Carolina Personal Umbrella Insurance Agency 

As a North Carolina resident, feel free to reach out to ALLCHOICE if you have any questions about personal or commercial insurance. We are a local, independent insurance agency that gives you the best value to take care of all your insurance needs. Contact Us today or request a Free Insurance Quote

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