Luckily this is an easy answer. A personal umbrella policy is an extra layer of coverage that sits over and above your home, auto, or rental home policies.
When the topic of a personal umbrella policy arises, the number one question we as agents get is, why do I need one? The answer is simple, if you have a catastrophic claim what will be there to protect you?
Some people say, well that's what auto insurance is for. My $300,000 limit is more than enough. But is it really? What is you are in an accident and you paralyze the other person? Do you really think $300,000 is enough to cover their medical expenses now and for the foreseeable future? Do you really think it's enough to give them an income when they are no longer able to work?
Many people respond to these questions with an answer similar to: “once my policy limit is used, that's all there is to give”. This answer, unfortunately, is as incorrect as you could get. Once your insurance limits run out, the injured party can then take you to court and sue you as an individual. The outcome of a lawsuit could include wage garnishment, the forced sale of homes or the forced sale of other property in order to generate funds to pay the injured property.
Maxing out your policy limits doesn't mean your off the hook, in fact, it means that depending on who injured the other person is, they could go after everything you own.
That's where an umbrella policy comes in. Once you max out the liability limit on your home or auto policy, your umbrella policy then jumps into action to provide further coverage.
Another $1mil or $2mil or $3mil in coverage could help substantially in the event of a large claim. Umbrella policies are meant to protect your assets such as your home or cars or jewelry and it's meant to protect your income. For those of you with a lot at risk just as a home, rental properties, or your own business, an umbrella is absolutely necessary to help protect you.
Other than protecting your life and your family, the other upside to an umbrella policy is that they aren't too expensive. For million dollar increments in coverage you will more than likely only pay a few hundred dollars a year.
A personal umbrella policy is absolutely worth having. Most people feel like these extreme events will never happen to them, but is it worth it to gamble your family's wellbeing just to save a few hundred dollars? I hope the answer for all of you is… it's not.