What is an umbrella policy and should I get one?

It is a rare occasion when the name of an insurance product accurately describes what the policy does. An umbrella policy does exactly what it says - it acts like an umbrella that sits on top of your primary liability insurance. If there are any deficiencies in your liability coverage, the umbrella policy takes care of them.

Your auto and home insurance policies come with a liability component built into them (learn more about The Key Components of Your Auto Insurance Policy). This is the part of your coverage that will defend and compensate you if you are found in court to be liable for causing things like:

• Bodily injury
• Property damage
• Defamation (slander or libel)

That coverage is important, but one problem with relying on it alone is that there are often limitations, both to the breadth of the coverage and the amounts insured. Umbrella insurance is designed to patch up those deficiencies and, appropriately, came on the scene when people started to get more litigious and courts began awarding larger and larger damages, leaving defendants on the hook for massive sums.

If you think you're at high risk of being sued, you might want to look into purchasing an umbrella insurance policy. Review your liability policies. If you're not comfortable with the protection they give you, umbrella insurance might be right for you. .

Some professions might also put you at higher risk of being held liable for causing some sort of damage. Writers or publishers, for instance, run a greater risk of libel, while swimming pool owners could be at higher risk of negligently causing bodily injury. If your primary liability insurance policies (such as those bundled into the homeowners insurance or CGL policies) don't have high enough limits or exclude the areas in which you are most at risk, an umbrella policy can have you covered.