Umbrella Insurance Policy

Umbrella insurance is a type of personal liability insurance. It protects you and your family from large claims or lawsuits that exceed the limits of your other policies. And it can serve as primary insurance for losses not covered by other policies.

Umbrella insurance covers your money by filling the gap that your other insurance policies don't cover. Here's an example. Let's say you're at fault in a car accident and liable for $300,000 in car repairs and medial expenses. Your car insurance only covers $100,000, so you owe $200,000 out of pocket. If you have umbrella insurance, it'll pay the difference. And you can use it to cover your legal fees if necessary.

Umbrella insurance can provide coverage for a wide variety of needs, including injuries, property damage, certain lawsuits and personal liability situations.

It doesn't cover damage to your own home, car or other possessions. It also doesn't cover business losses, written or oral contracts, or intentional or criminal actions.

Umbrella insurance is a good idea for people whose net worth exceeds the maximum liability coverage they can get from other insurance policies. It's also helpful for people with additional risk factors, such as frequent international travelers, landlords and people with high-profile careers.

It's best to ask your insurance agent to help you figure out the correct amount, but you may be able to get a ballpark figure by calculating your net worth. Your umbrella insurance policy should match your entire net worth, excluding certain assets such as your employer-sponsored retirement accounts. Those usually aren't at risk from lawsuits.