What is 'umbrella' insurance?

You may find yourself on the wrong end of a lawsuit if you are responsible for a tragic auto accident or cause significant injury to a guest on your property. A claim for damages will initially go to your auto or homeowners insurance carrier. However, policy limits may not be enough to pay for a legal defense and high damage award resulting from a catastrophic incident. This puts your financial assets at risk.

Umbrella insurance picks up the excess amount (up to the umbrella policy limit) once the underlying policy's coverage has been exhausted. Insurers typically offer umbrella limits in million dollar increments. In addition, most companies want to insure the underlying auto, home, boat, recreational vehicle, etc. The liability limit on each of these policies must match the umbrella's underlying liability requirement.

Evaluate your financial assets to decide if you need umbrella coverage. Include owned property as well as checking and savings accounts, investments, and retirement funds. Consider future income earnings as well. Everything is at risk if you are sued for a large sum.

An insurance agent can provide more details about umbrella insurance requirements, coverages, exclusions, and costs