What is an Umbrella Insurance Policy?
Often, an umbrella policy is really liability coverage above and beyond the coverages by a regular policy. Umbrella policies are most frequently sold in increments of 1 million dollars. The term “umbrella” is used primarily because it covers liability claims from all policies underneath it, for example auto insurance and homeowner’s or renter’s policies. If the insured carries an auto insurance policy with liability limits of $250,000 and a homeowners insurance policy with a limit of $500,000, then with a million dollar umbrella, the insured’s limits become essentially, $1,250,000 on an auto liability claim and $one,500,000 on a homeowners liability claim. The insurance is nice mainly because it applies to more than one insurance instead of raising both rates to cover liability. Also, many car insurance companies don’t provide a million dollar coverage or much more in most instances. Homeowners insurance can frequently be raised, but it might do so at a hefty cost to the insured.
