It's reassuring to have insurance on our home, our health and other parts of our lives. But sometimes our primary insurance policies leave gaps in coverage, and limits in payments.
Those gaps can hurt, especially when accidents happen and put you at financial risk. For example, you can get sued if your insurance doesn't provide enough coverage.
To protect yourself, you may want to consider umbrella insurance.
What is umbrella insurance? It is primarily extra liability insurance, and it's designed to help protect you in the event of an accident, a lawsuit or other major claims. It therefore helps to secure your current assets -- and your financial future -- if you are in a major auto accident, for example, or if someone injures themselves while visiting your home.
Now, you may be thinking that you already have insurance, and that you don't have that many assets anyway.
The problem? It is not just about what is in your bank account. Lawsuits can claim more than that in damages, and can put your retirement savings and your house at risk. A settlement can even garnish your wages.
In these cases, umbrella insurance can cover amounts above the limits of your current homeowner and auto policies. It can also cover any rental units you may own, and cover you in case of false arrest, libel, or slander.
There are some requirements: Insurance companies generally demand specific levels of liability coverage on your existing homeowners and auto policies before they will approve an umbrella policy. Generally, those requirements are $300,000 per occurrence for your home policy, $250,000 per person, $500,000 per accident for bodily injury and $100,000 per accident in property damage on your auto policy.
But there is an up side: Umbrella coverage is inexpensive, usually around $200 annually for $1 million in protection. That is a low price to pay to ensure that your assets and future are protected, and for the peace of mind that comes with it.