What is an 'Umbrella Insurance Policy'

An umbrella insurance policy is extra liability insurance coverage that goes beyond the limits of the insured's home, auto or watercraft insurance. It provides an additional layer of security to those who are at risk for being sued for damages to other people's property or injuries caused to others in an accident. It also protects against libel, vandalism, slander and invasion of privacy. An umbrella insurance policy is very helpful when the insurance owner is sued and the dollar limit of the original policy has been exhausted. The added coverage provided by liability insurance is most useful to individuals who own a lot of assets or very expensive assets and are at significant risk for being sued.

BREAKING DOWN 'Umbrella Insurance Policy'

The premium for an umbrella insurance policy may be less expensive if the policy is purchased from the same insurer that provided the original auto, home or watercraft insurance. Depending on the provider, the policyholder who wants to add umbrella insurance policy is required to have a base insurance coverage of $150,000 to $250,000 for auto insurance and $250,000 to $300,000 for homeowners insurance.

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