What is the purpose of "umbrella insurance"?

The purpose of umbrella insurance is to provide additional liability coverage over and above the limits of standard policies, such as homeowners, auto, or boat insurance. This type of insurance is designed to protect individuals from significant financial loss resulting from lawsuits or claims that exceed the coverage limits of their primary policies.

For example, if a person is found liable for an accident that results in damages exceeding $300,000, but their auto policy only covers up to $250,000, the umbrella insurance can cover the remaining amount, thereby safeguarding the individual’s personal assets from being depleted. Umbrella insurance can also provide broader coverage, including certain claims that may not be included in standard policies, which adds an extra layer of financial protection.

This specialized coverage is particularly beneficial for individuals or families who may have substantial assets to protect, as it can significantly reduce the risk of financial devastation due to unforeseen liabilities.