What is an Umbrella Policy and Why Do You Need One?

An umbrella insurance policy is a type of coverage that gives you more protection than your home, auto, and life insurance policies. This coverage is designed to fill gaps in your other policies by providing extra monetary protection during the worst case scenario.

In addition to protecting your home, car, and loved ones from threat of injury or death should you become disabled or pass away unexpectedly, an umbrella policy can also help cover the cost of damages to property or liability claims for bodily injury.

The cost of damage to your home or car is known as a loss, meaning the more it exceeds the limit of your home, auto, and life insurance policies, the less you get compensated. If that loss includes damages to your personal belongings, then you'll want an umbrella policy in place a few months to a year before the loss occurs.

Why Would I Want an Umbrella Policy?

Before you can know whether or not you want an umbrella policy in place, you'll need to weigh two things: (1) the costs and benefits of having one; and (2) the level of risk you think could impact your well-being.

Eventually or if the worst happens, however, and you become disabled or pass away unexpectedly in the midst of a serious illness or accident, then having an adequate level of coverage is essential. A catastrophic loss against your home, auto or life insurance will not cover the burden of property damage or liability claims.

This is how an umbrella policy can come in handy.