Umbrella insurance is designed to provide liability coverage over and above the policy limits of your car or homeowners’ insurance coverage should you be sued. It gives you a level of insurance coverage that kicks in after the limits of your normal policy have been exceeded.
If you own one or more motor vehicles and a home, you’ll be smart to seriously consider good umbrella insurance coverage. It’s relatively inexpensive and it will save you from potential financial ruin should someone be injured on or in your property.
If you purchase umbrella insurance, your coverage generally kicks in when your traditional homeowner or auto liability policy limits are fully used. The norm for an umbrella policy is $1 million in coverage, but additional coverage can be bought that well exceeds that amount. Before you can buy umbrella coverage, you are mandated to already have maximum liability insurance on your other, existing policies. Normally, that means $250,000 for homeowner coverage and $300,000 for auto.
In some ways, umbrella coverage is more comprehensive than normal liability coverage. Most umbrella policies will protect the policyholder from lawsuits that can even include the idea of false arrest, libel, slander and other various issues. This coverage will often cover attorney fees that go beyond normal policy limits.
The more assets you have, the more coverage you will generally need. If you were at fault for a major car accident and you were deemed responsible for $500,000 in damages but had only $300,000 of coverage, you would be encumbered with the extra $200,000 out-of-pocket. Your personal assets could evaporate. Having a $1 million umbrella policy will likely only cost around $200 per year, which, when considering the significant level of coverage, is quite reasonable. And, what you can’t put a price on is the incredible peace of mind you’ll feel when covered.