What is an Umbrella Insurance Policy?

Buying insurance requires a certain amount of research before you even begin comparing insurance quotes and part of that research is learning the terminology associated with different types of insurance, including auto, home, life, health and renters. One term that might not be completely understood is “umbrella insurance.” Essentially umbrella insurance is a liability insurance policy that protects the policyholder against claims and losses that exceed primary insurance policies. This type of liability insurance is called umbrella insurance because it covers many types of primary insurance such as auto insurance and home insurance.

Umbrella insurance policies are designed to protect your present and future assets and earnings in the event of an accident or other event that is so costly is exhausts your basic coverage. Typically umbrella insurance is purchased in $1 million increments. If your home insurance policy has basic coverage of $250,000 and you purchase a $2 million umbrella policy, your new total home insurance coverage becomes $2.25 million. Your auto insurance policy would also increase by $2 million with the umbrella policy.

Do you need umbrella insurance?

If you are at high risk for lawsuits for any reason, an umbrella policy is the way to give yourself and your assets additional protection. People with a very high dollar amount in assets should consider umbrella insurance to ensure their possessions are protected. Umbrella insurance is an easy way to give you greater peace of mind that your insurance needs are completely met with one additional policy. Usually a basic $1 million umbrella insurance policy will only add a few hundred dollars to your annual insurance bill and provide substantial coverage above and beyond your basic insurance policies.

Did you know? The liability insurance of an umbrella policy typically also includes coverage for false arrest, libel, slander and invasion of privacy.

Takeaways:

1. Umbrella insurance is liability insurance coverage above and beyond your basic policies, such as auto insurance and home insurance.
2. Umbrella policies are typically purchased in increments of $1 million.
3. People with a need for protection against lawsuits or own a high dollar amount in assets benefit from umbrella insurance policies.

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