A personal umbrella policy provides liability coverage over and above your home and auto insurance policy coverage. It is meant to protect you in case of catastrophic circumstances: you cause very serious injuries to someone in an auto accident and you are liable to pay a large sum above and beyond the amount your liability coverage (Part A on your auto insurance policy). Or someone comes to your home, slips on the steps and suffers serious injuries that are above and beyond the liability limits of your homeowners insurance, or you causie significant damage to someone's property. In certain cases, it can also protect you from the risk of a lawsuit. ...Show details

The main reason you need to consider an umbrella policy is to protect your personal assets: savings, investments, and other properties that you may own. Most states protect the payor from either losing their home or retirement savings.Show details The need to purchase an umbrella policy increases if you frequently drive or entertain guests at your home or you live in a prosperous town. A standard umbrella policy provides for $1 million worth coverage, although you may purchase one for a higher amount. Most umbrella policies require a certain minimum of liability coverage on your homeowner and auto policies. This policy is relatively inexpensive with annual premiums ranging from $250 to $300 for $1million in coverage. The coverage is fairly broad and in some cases may include liabilities that arise while traveling outside the country. The umbrella policy pays out after the underlying homeowners or auto policy has maxed out its payments. Please note: liabilities arising as a result of any intentional criminal act are not covered by any policy.

Calculating the amount of umbrella policy amount is fairly straightforward and you can do it in 3 easy steps.

  • Calculate your net worth and financial health score.
  • Now add up your liability coverage amounts on your home and auto insurance policies.
  • If your net worth is more than the total liability coverage, you need an umbrella policy. The umbrella policy coverage amount should be equal to or more than your net worth minus the liability coverage you have.
  • Review the value of your personal wealth, your driving needs, and frequency of visitors to your property.
  • Review your family situation (e.g. a child is about to start driving).
  • Estimate the amount umbrella policy coverage (see above).
  • Compare the quotes from a few well known insurance companies.
  • Buy the policy.
  • Pay your premium on time.
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