Need an umbrella? Why you may want $5 million liability coverage


At Mitch, we feel strongly that every one of our customers should have much more liability coverage than the minimum $200,000 mandated by the Ontario government as part of every auto insurance policy. Between 2012 and 2016, there were about 6,500 court awards above $200,000, and more and more are going over $1 million too. For that reason, we strongly recommend that auto insurance customers pay a little more to increase their limit to $1 million, or preferably $2 million.

If you have a home insurance policy, you likely have $1 or $2 million in liability coverage as part of that policy as well. For lots of Ontarians, having $1 or $2 million in coverage through their home insurance and an additional $1 or $2 million under their auto insurance policy is plenty. In fact, most insurance companies won’t sell you more than $2 million.

There are a growing number of Ontarians, however, who feel like they do need a little more. Not only that, but some also find it a good idea to have a combined upper limit of $5 million or more. Remember that ordinarily, the limits on your home and auto policies can’t be combined, say if you get sued for $4 million. The answer is what is called an umbrella policy that allows you to add up to $5 million to the coverage you already have as part of a home or auto policy. The coverage follows you, as well as your car and your home.

Do you need an umbrella insurance policy?

So the question is, do you need an umbrella policy? The answer depends:

  1. Do you have a high net worth or property and savings worth more than $2 million that some enterprising lawyer might advise their clients to go after?
  2. Do you take part in activities that could kill or injure people, or cause major damage to property? For example:
    • Do you have a swimming pool or trampoline?
    • Do you have a motorboat?
    • Do you have a dog? (Obviously, some breeds are riskier than others)
    • Do you hunt, ski, surf, play golf or practice other sports where you could endanger others?
  3. Do you take part in activities where others could blame you for injuries or other losses? For example:
    • Are you a landlord?
    • Do you volunteer?
    • Do you sit on boards or committees?
    • Do you coach kids’ sports?
    • Do you regularly post reviews of products and/or businesses?

With the average home in Toronto now worth $800,000, a lot of people who may consider themselves middle-class actually have quite a lot to lose. It’s sad to say, but often the amount that someone will try to sue you for is determined by how much they think they can get.

To help decide if an umbrella policy might be for you, answer the questions above. If you don’t have a good sense of how much you’re worth, talk to a financial advisor. If you’re at higher-than-normal risk of being sued, or If you’re worth more than your highest liability limit, you may want to talk to your insurance broker about an umbrella policy.

What you need to know about umbrella insurance

A few things you need to know about umbrella policies:

  • Not all insurance companies offer this kind of insurance, but you can get an umbrella policy even if your home, auto or other policies are with another company.
  • The policy follows you, and so the insurance company will want to know about any properties you own, ATVs, boats etc.

If you’re not sure, one of our experienced brokers would be happy to answer your questions, help you decide if an umbrella policy is a good idea for you, and offer you quotes based on your circumstances.

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