When you carry a number of different insurance policies, you likely have varying degrees of protection, depending on the requirements, assets, and overall discretion of your budget. Each of these policies will ultimately leave ‘gaps’ in coverage, especially when two or more policies could be called upon during a claim.
Umbrella insurance policies essentially ‘drop down’ to cover gaps left by other policies under the insured’s name. It can also be used to provide more liability coverage than what is guaranteed under other policies.
Why Carry Umbrella Insurance?
Depending on your assets and wealth, regular insurance policies may not provide enough asset protection when it comes to liability. For example, if you own a home that is valued at $500,000 but your personal assets are valued at over $1 million, then you are exposed to personal loss over the amount of your current insurance policy.
In this example, carrying an umbrella policy will help protect your assets and investments against potential liability.
Put another way, if you have guests at your home and one of those guests has a serious accident, such as falling down the stairs, they could file a lawsuit against you for liability for the accident. They could sue you for $1 million, for example. If your policy only protects you against half of that amount, your personal assets could be seized to cover the rest, depending on any settlement or verdict in court.
Carrying umbrella insurance is a vital component for any individual who wishes to protect his or her assets against liability.