Umbrella insurance is liability coverage that you can purchase to protect you from rare but serious lawsuits.

If you own a car, you have auto insurance. If you own a home and pay a mortgage, you have home owner’s insurance. Both of these policies carry liability coverage limits, that are meant to pay for damages caused to a third party for either property or casualty losses. That means if you are in an auto accident that is your fault and damage another persons vehicle, and cause injury to that person, their car will be fixed, and their medical bills covered, up to the limits within your policy. Similarly if someone is injured on your property due to you negligence, your home owner’s insurance coverage will pay for thier injuries up to the limit of your policy.

But for those rare but serious cases where injuries can surpass the limits of your home or auto insurance, Umbrella Liability can step in to protect you and your assets. Consider Umbrella Insurance to be extra protection that you can purchase in case a serious accident does happen, and you are found at fault.

The best way to explain what Umbrella or Excess Liability coverage is, is to tell a story of when it could be helpful.

Let’s say you have a party for you and some close friends at your house. You live in a one story home with your fiance and have a big back yard with an emaculate pool. It’s the middle of the summer and so you throw a small party, with BBQ, drinks and a small invite list. One of your neighbors invites her new boyfriend, an engineer. You meet the engineer and get a long with him quite well. Later in the day some folks decide it’s time to get into the pool. Your neighbors boyfriend, the engineer, dives into the pool head first, and hits his head on the bottom of the pool. He suffers serious neck injuries and as a result will never walk again. He decides to sue you because it is your house, and the courts find that you are at fault and therefore liable for his injuries. Chances are your homeowner’s insurance only has $300,000 or maybe $500,000 in liability coverage. If the court decides to award the injured engineer $2,000,000 in a settlement, you will be responsible for coming up with the money to pay down that debt.

In this example, you never wanted the engineer to get hurt, you just wanted to have a fun, friendly pool party. But the fact that the injury happened at your home places some level of responsibility on your shoulders. An umbrella policy could step in to pay the additional monies awarded in the settlement by the judge, protecting your own personal assets.

This is just one example but there are many others. The fact is in this day and age, and the rising cost of medical care, $300,000 or $500,000 just doesn’t go far enough in the event of a serious injury.

What you should know is that adding an additional $1,000,000 or more in umbrella liability coverage is not going to break the bank. Umbrella coverage is actually very affordable.

Talk to your local insurance Advisor today if you have questions about umbrella coverage, it just may be the most important converstation you have this week.