What is Umbrella Policy and Who Needs It?

There is probably a wide variety of insurance policies you already purchased to make sure you are totally covered, but there is a big chance you are missing an umbrella policy. Typical policies would include auto, home or renter’s insurance, life insurance, motorcycle, boat, or ATV insurance. All those insurance names are quite simple, and it is somewhat obvious what they are designated to protect. Therefore, a lot of people get confused about what is an umbrella policy, and why anybody would need it.

A good pair of rain boots will protect your feet from getting wet. A rain jacket will protect your body. How do you protect those more vulnerable areas that are difficult to cover? An answer would be an umbrella, and this is what this type of insurance does – help you cover expenses when other types of insurance cannot.

An umbrella policy is also known as excess liability or personal liability insurance. But the most important part about umbrella insurance is that it does not stand alone, rather it acts as a supplemental instrument to other insurance policies. Generally, umbrella insurance is your personal insurance coverage that kicks in when other forms of insurance payouts reach their limits. A lot of people heard about 50/100/25 liability coverage when it comes to auto insurance, but a lot of people do not realize what it means. For example, 25 at the end stands for $25,000 of property damage, which means that your insurance will not cover any damages that go over $25,000 and you can be personally responsible for the coverage of the rest of the damages. Allstate provides a great example of when an umbrella policy can be very useful.