As its name implies, umbrella insurance sits “on top of” your other insurance policies like an umbrella, to provide added financial protection in the event that other policies cannot cover the loss.
For example, let’s say that you rear-end a luxury vehicle, and it turns out that you must pay far more than your insurance coverage allows. If you don’t have an umbrella insurance policy, you’ll need to figure out where to get that money. But if you do have umbrella insurance, then that policy would kick in and you would likely pay nothing out of pocket.
It used to be that only the very wealthy needed umbrella insurance. But anyone can be sued for any reason at any time, and umbrella insurance provides added protection against losses. If someone falls on your front steps or your tree falls on a neighbor’s house during a storm, they can successfully sue you for damages. Anything that happens on your property or because of your property is fair game and not always covered by traditional homeowners’ insurance. Umbrella policies provide protection in many situations that usual liability policies don’t cover.