Updated: August 2016
Protecting your family and assets is a top priority, which is why people have insurance. But what happens if you find yourself in a situation where your basic homeowners or automobile insurance is not enough? Well, that's when a personal umbrella insurance policy could help cover you.
A personal umbrella policy is a type of insurance that provides liability coverage over and above your automobile or homeowners policy. So, if your liability coverage isn't enough to pay for the damages of an accident you cause or a visitor's injuries on your property, a personal umbrella insurance policy kicks in right where your underlying policy's coverage left off.
To better understand how a personal umbrella policy works, here's an example: If you're at fault in a car accident that injures another driver, your regular automobile insurance may cover the other driver up to the limit you selected, say $250,000. But what happens if that limit is not enough to cover the other driver's resulting medical bills?
If the other driver's injuries are severe, you may be legally responsible for damages beyond the $250,000 your car insurance policy covers. And, if he sues you, your personal assets could be at stake. Imagine if that injured driver were a surgeon or another highly paid professional. What if the accident you caused resulted in an injury that kept him from doing his job for six months? Suddenly, he's suing you for $1 million to cover the six months he's away from work.
Your automobile policy's liability coverage may pay for up to $250,000, but where would you come up with the remaining $750,000? A personal umbrella policy can help cover the additional costs when your standard insurance policy isn't enough. An umbrella policy could provide the additional coverage you need so that you don't get stuck trying to pay the remaining balance yourself. This extra policy could help protect your bank account, home and other personal property.
In most cases, personal umbrella policies are available in million-dollar increments, from $1 to $5 million. While an umbrella policy is not required, it may offer increased protection in the unfortunate event of an accident.
A local agent can answer questions about personal umbrella policies so you can decide whether having additional liability coverage makes sense for you.