When accidents happen at home, on the road, or on the water, you can never know how much damage may be done. If you’re involved in an accident with injuries or property damage, the amount of money you are expected to pay may far exceed any estimates you make.
Insurance policies are limited in their liability protection and payouts, though, and, once you exhaust the liability insurance, you, as a policyholder, are responsible for the rest of the money owed. Avoiding this type of personal payout is the purpose of umbrella insurance.
An umbrella policy is additional insurance that becomes available if the money you owe for causing an accident exceeds the liability coverage of your current home, auto or boat insurance policies. Having such a policy prevents the extra liability from falling on your personal finances, and the potential seizure of your property to cover the difference between the amount the courts determine you owe and the amount of liability your current policies cover.
It is a safety net that protects your assets and your lifestyle.