Definition of an Umbrella Insurance Policy

Umbrella insurance provides reassurance and protection against lawsuits and claims that exceed the limits of your other insurance policies.

Definition
An umbrella insurance policy covers liability expenses that go beyond the limits of your existing homeowners, automotive, renters, watercraft, motorcycle and/or other personal insurance policies.

Function
Your homeowners, automotive, and other personal insurance policies have limits---a maximum they will pay on a single incident. If you are sued or a claim a claim is settled against you for more than the maximum the insurance company allows, you are personally liable for the rest. An umbrella policy covers "the rest" of your personal liability up to the policy's limits.

Features
An umbrella policy is only used if you exceed the liability limits of coverage under your other personal insurance policies, so the premiums are usually very affordable.

Benefits
An umbrella insurance policy helps protect your assets from being seized or attached in the event you are held liable for paying a claim or lawsuit that exceeds the limits of your other insurance policies; a policy like this can also prevent a judgment against you that can eventually lead to a lien on your house or business.

Limits
Umbrella insurance policies typically offer coverage limits starting at $1 million; some policy limits can be up to $5 million.