A personal umbrella policy provides you with a layer of liability protection. It may help cover the cost to defend you against a claim in court and may even help pay for a legal settlement made against you.

An umbrella policy typically kicks in once you've reached the liability limits on an underlying policy, such as homeowners or auto insurance. So, for instance, if a visitor was injured at your home and you were sued as a result, umbrella insurance may help cover what you're found legally responsible for if the costs exceed the limits of your homeowners policy.

In other cases, such as a libel or slander lawsuit, it may provide liability protection for situations that may not be covered by other types of insurance.

According to the Insurance Information Institute, umbrella liability coverage typically ranges from $1 million to $10 million. But you usually have to meet certain liability coverage requirements first: For example, most insurers will want you to have at least $300,000 in homeowners liability coverage before they'll sell you an umbrella policy.