Personal umbrella insurance adds another protective layer in the event of an automobile or property accident. Personal umbrella insurance goes above and beyond your current auto and homeowner’s insurance coverage to add an extra layer of protection on top of these other limits. In the event of a claim, it is possible that the liability payout may exceed your auto or homeowners’ limits. An umbrella extends those liability limits up to an additional fixed amount.
So how does a personal umbrella insurance policy work?
Let’s say someone is injured at your house and the total cost of their judgment is $1,000,000. If your homeowner’s policy has liability coverage up to $300,000, without an additional liability extension, or umbrella policy, you would be responsible for the remaining $700,000 of that claim out of pocket. However, if you have a personal umbrella insurance policy with coverage up to $1,000,000, the $700,000 overage on the claim leftover after your homeowner’s policy paid the initial $300,000 would be covered by your umbrella coverage. The same concept applies to your automobile insurance, as the umbrella would give additional liability coverage to specified limits on your auto insurance.
The only thing you would have to pay is your monthly premium. In the event of a $1,000,000 claim where your homeowner’s coverage limits are $300,000, without a personal umbrella insurance policy, you would be responsible for $700,000 in damages. In order to pay the remaining cost of the claim, that could mean liquidating assets, selling your vehicles, selling your home, and more. A personal umbrella could help protect you from that risk.