Umbrella insurance is a type of extra liability insurance that can be purchased by individuals or businesses. The coverage provided by an umbrella policy is an extra layer of protection beyond what is provided by your other auto, home or business policies. Umbrella insurance is sometimes referred to as excess liability insurance. You must have base insurance coverage from one of these other policy types before you can purchase an umbrella policy. It makes sense to purchase an umbrella policy if the limits on your other policies do not fully protect all of your financial assets from risk.
Personal umbrella policies provide benefits after your base auto or homeowners insurance coverage has been exhausted. Imagine you are responsible for a serious auto accident, resulting in injuries to others costing $600,000 to treat. As the driver at fault, you would be liable for any expenses that exceed your auto policy limit. If your auto policy limit is $250,000, you would be expected to cover the additional $350,000 from your own assets. If you have an umbrella policy, that policy would cover the excess costs for you, protecting you and your future from major financial risk.
Commercial umbrella policies are available for businesses, and provide benefits in addition to your underlying business auto and general liability policies. Commercial umbrella coverages provides higher limits, thus offering extra protection for business assets. Businesses can be the target of lawsuits, and having this extra layer of coverage can help protect the future of the business. Just like with personal umbrella coverage, business umbrella policies only apply once the limits of your other applicable insurance have been reached.
Both personal and commercial umbrella coverages are typically available with limits in $1 million increments. You should purchase this insurance if you feel your other policy limits are inadequate to fully protect your assets. Umbrella coverage can expand your protection at a reasonable cost and help you avoid a devasting financial loss.