If it’s raining outside and you have a raincoat with a hood on, that’s
pretty good.  It will keep your clothing dry for the most part.  Your
pants and shoes might get wet and your face might get a little wet.  If
you want to stay drier, add an umbrella for more protection.  That’s
what an umbrella policy does for you, as well.  It provides that
additional layer of protection above and beyond the limits of liability
covered under both your auto and homeowners’ insurance policies. 

An
umbrella policy protects you and others covered against the financial
burdens of a catastrophic claim, lawsuit or judgment by:
•    Providing expanded liability coverage over and above your primary liability protection

•    Increasing the amount of coverage beyond that of your auto insurance and homeowners’/renters’ insurance

 

The myths about umbrella coverage:

•    It is just for the rich.
•    It is too complicated to coordinate with your existing insurance.
•    The premiums are too expensive.

All
of these myths are incorrect. Umbrella liability is relatively
affordable, can be easily coordinated with your existing insurance
policies and by no means is it just for the well to do. High coverage
limits such as those provided by an umbrella policy, can be very
important if you have significant assets to protect. (A home, a
business, etc.)  But your assets may be modest in size and need similar
protection.  It can be less expensive than merely raising the limits on
each of your individual policies separately, and can sometimes be issued
in higher amounts than your auto or homeowners’ insurance company is
willing to provide.  You will still need auto and homeowners’ or
renters’ coverage, as insurance companies require certain minimum levels
of underlying coverage before they will consider issuing an umbrella
policy.

Example
Assume you have an automobile liability
insurance policy providing $100,000 /$300,000 in coverage – the first
figure representing the maximum liability to one person injured and the
second figure, the maximum liability for all persons injured. Your
17-year old son is at fault for an accident and seriously injures
someone – a few days of hospitalization and some surgery can easily eat
up that $100,000 limit. An umbrella policy pays for any liability you
incur above that $100,000 limit up to the limits of your umbrella
coverage. Without umbrella coverage, you may be personally responsible
for covering the injured person’s medical bills over and above your
policy limits. An umbrella policy provides you with an additional layer
of protection that would pay those added amounts, up to the limit of the
umbrella coverage.  And it is less expensive than you might think.

Generally
speaking, anyone with over $100,000 in assets may want to consider
purchasing umbrella coverage. It is usually not expensive as it is
triggered only after primary levels of insurance have been exhausted –
therefore the insurance company views the risk of it being utilized as
far lower, knowing that the primary insurance company will also be
handling nearly all of the legal work if there is a claim.  Do shop
around for the best rates.

Some examples of where umbrella coverage often comes into play:
•    An auto accident in which you are sued under your auto insurance policy.
•    Your neighbor slips and falls on your property, and you are sued under your homeowners’ or renters’ insurance.
•    A natural disaster in which another person’s property is damaged by your tree crashing down on their vehicle or home.

Stand-alone umbrella policies
If
umbrella coverage is for you, check with your insurance carrier and see
if they offer it at a reasonable price.  If you cannot get a good deal
on umbrella coverage from your current insurance company, it is
important to know that many insurers offer “stand-alone” umbrella
policies where the insurance company that issues the umbrella policy
doesn’t require you to also insure your home and car with the same
insurance company. You’ll still need that basic underlying policy even
if it is with another carrier, and the Umbrella limits will go on top of
those. So if, for example, you own real estate or autos located in
various states, this type of policy can insure them all and you do not
have to change your current insurance companies.