Umbrella insurance is a policy that covers you when your existing insurance is exhausted. This policy is also called an excess liability policy. It is supplemental coverage that kicks in if you have liability that exceeds the limits in other policies. Most people use this for auto or homeowners insurance.
Anyone can get one of these policies. However, it makes the most sense for wealthy individuals with valuable assets. This are individuals who could have significant financial exposure if hit with a lawsuit that exceeds their insurance coverage. This coverage is also recommended for professionals such as doctors or lawyers.
How it Works
Umbrella coverage becomes active when a claim exceeds the liability limits on an insurance policy. If you have $100,000 worth of coverage, but must pay $200,000 because of a lawsuit, then umbrella coverage can help.
There are personal and business umbrella policies. A personal policy pays for liability claims that exceed the limits of another insurance policy. A business policy offers extra protection beyond the limits of your malpractice or errors and omissions insurance.
Umbrella insurance offers protection for your assets and future earnings. It is also inexpensive, and easy for just about anyone to afford.