What is Umbrella Insurance?

Answer:
Umbrella policies are insurance policies that

extend the liability limits of your existing insurance policies. For example, if you have assets such as a home or significant savings and you are involved in a serious accident, the damaged party may go after your assets after the limits of your policy have been reached. An umbrella policy will kick in after you’ve exhausted your other liability insurance coverage and offer you further protection from costly lawsuits.

Umbrella policies aren’t strictly for wealthy people. If you have any assets that someone could go after, you probably need an umbrella policy. For example, if you own a home that’s worth $300,000, this will be an attractive asset to target if the damage exceeds your policy limits. It doesn’t take long for medical bills to add up to lofty amounts. If the injured party will be affected for a lifetime, your $300,000 liability limit may barely make a dent in their claim. Seeing that you have additional assets could cause the injured party to bring a lawsuit against you and you may lose your home. An umbrella policy would limit your risk.