Is something that one hopes to never use, but if you do, you are happy you made the purchase. Umbrella brings additional liability insurance for situations when the claim is more than the limits on your home or auto policy.

The umbrella policy works in tandem with your existing home or car insurance – Umbrella coverage is purchased in monetary increments. Such as, form one to five million. Proving significant coverage for a minimal amount considering the amount of coverage.

Understanding umbrella insurance

The benefits of umbrella insurance (excess policy) come into effect when a liability claim covered by your home or auto insurance is more than the coverage limit you have on the policy. It is not uncommon for the insurance companies to request a certain level of personal liability coverage. Also, some providers require you to insure both your home and auto policies with one insurance company in order to purchase an umbrella policy. 
How much coverage is enough?

This very much gauged on a case by case basis. Though, the gauge is normally based around your net worth. Any claim greater than your standard liability is your responsibility to pay. Which means you could be forced to pay anything above you standard liability coverage with your currents assets, such as savings account or even the liquidation of your home to pay for large claims against you. The likelihood of a disastrous situation are slim, though some people really value the peace of mind knowing there assets are covered with an umbrella insurance policy.

Example

A driver crashes into another car. The driver who is struck suffers severe injuries totalling up to $800,000. The driver at-fault has insurance which covers injuries to any one person up to $250,000. There is $550,000 which the at-fault driver is still liable for. If they have an umbrella policy for $1,000,000 the umbrella insurance policy would cover the excess cost. If there wasn’t an umbrella policy, the at-fault driver is liable for the $550,000.