What is the umbrella policy? Do you need a umbrella policy? These are reasonable questions that everyone has to ask. This article describes the basics of such a strategy and what it can provide.
The umbrella policy covers your limits on liability for all individual policies. It provides additional liability for others and it will not give you any additional insurance. It also provides additional protection for any and all of your personal policies. It reaches the limit of your choice, usually about $1 million. This means that your home, rental property, cars and toys can be extra protected from your umbrella policy. One thing to consider is that your insurance company needs to impose a higher liability limit on all of your personal policies before providing you with an umbrella. The required limit is typically $250,000 per person for personal injury protection and $500,000 per incident. Every insurance company is a little different, you need to check with them to see what is needed.
We will use an example to demonstrate how the umbrella protects you. When you drive a car, you lose control and cause many people to be seriously injured. The total amount of all medical bills reaches $750,000, but unfortunately you can only get $500,000 in insurance. At this point, your umbrella policy will be activated to cover an additional $250,000.
So do you need a umbrella policy? This is a question you must answer yourself according to your own living conditions. Usually, ordinary people do not undertake such a policy. Those who have umbrellas often “lost a lot” or major assets.
This policy gives you extra protection so you don't lose all your assets and wealth due to litigation. Keep in mind that the extra insurance it provides exceeds the limit of liability for your personal policy. If you decide to consider a umbrella policy, then the local insurance agent is a good starting point.