Purpose of Umbrella Policy for Car & Home Insurance
An umbrella insurance policy works with your home and auto insurance to provide you with additional liability insurance. If you injure someone or are sued, your auto and home liability limits may not provide enough coverage. An umbrella policy provides extra protection so that your home, savings and others assets are not depleted.
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Definition
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Umbrella insurance provides additional liability coverage over and above what your homeowners and auto insurance provide. It offers broad coverage--including libel, slander, defamation of character, legal defense costs and bodily injuries or property damage caused by the insured or members of the insured's household.
Coverage Limits
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The coverage limit for a typical umbrella policy is $1 million. However, purchasers can buy up to $100 million in coverage, depending on the insurance company. If you are going to buy an umbrella policy, you should buy at least a large enough umbrella policy to match your personal assets--if you have assets adding up to $5 million, you should buy at least a $5 million umbrella policy.
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Cost
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The premium for an umbrella policy is usually $200 to $300 a year for $1 million worth of coverage as of December 2009. The exact cost depends on the amount of coverage, the insurance company and your risk factors--such as how many accidents you have been in or what your line of work is.
Prerequisites
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Before you can buy an umbrella insurance policy, your insurance company generally requires that you carry the maximum available liability coverage on your auto and home policies. As of December 2009, this is usually $250,000 on your auto policy and $300,000 on your homeowners' policy.
Other Names
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Umbrella insurance is also known as personal liability insurance.
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References
- Photo Credit Image by Flickr.com, courtesy of Tony
