Umbrella Policy

What Does Umbrella Policy Mean?

An umbrella policy is a type of liability insurance that offers additional coverage beyond the limits of the policyholder’s home, auto, and watercraft policies. This added protection helps cover major liability claims that could exceed the coverage limits of standard policies and also includes coverage for various legal and personal liability situations that may not be covered by those policies. This is the same coverage gap that drivers run into when they ask whether liability car insurance is really enough after a serious at-fault accident.

Insuranceopedia Explains Umbrella Policy

An umbrella policy provides liability coverage not only for bodily injury and property damage to others, as expected, but also extends coverage to situations involving rental units and lawsuits for slander, libel, false arrest, mental anguish, and other personal liabilities. This extra protection is especially beneficial for individuals who own numerous or high-value assets and face a heightened risk of being sued. Premiums for an umbrella policy may be lower if purchased through the same insurer that issued their original property insurance; however, the policyholder generally needs to have base coverage above a certain threshold to qualify. Since umbrella coverage typically requires you to carry minimum liability limits on the underlying home and auto policies, it’s worth comparing top-rated homeowners insurance providers and car insurance companies before adding the umbrella layer.