What exactly is an umbrella policy? I have heard more different answers on that specific type of policy from people not in the insurance industry, than any other coverage.
Umbrella Liability covers risk associated with being sued. So, maybe you have 3 cars, a boat and a home. Those are 5 different risks. 1 home, 3 cars, and 1 boat.
If each of those risks have $250,000 of liability protection, (Protection if you are liable for someone’s injury or loss), and there was a loss, you have $250,000 of protection before your personal assets are at risk. So if you were deemed at fault in a wreck, and people were hurt, then that $250,000 may be soaked up quickly. It doesn’t take long.
An Umbrella Liability policy places a layer of additional protection over all of your risks. So if you had a $1,000,000 Umbrella policy, it would place an additional $1,000,000 of protection over each $250,000 risk.
This is the least expensive way to protect your home and finances, period. Most umbrella’s run around $250 per year. Obviously it depends on drivers, how many vehicles, homes, etc.