Umbrella Policy

In personal lines insurance, an umbrella policy is an insurance policy you can buy that gives you higher liability limits than the limits provided in your automobile insurance policy or homeowners insurance policy. See Limit (of Insurance). For example, your automobile liability insurance policy may provide you with limits of $500,000 in case you are found liable as a result of an accident. But if the person to whom you are liable is claiming more than $500,000 in damages, those limits will not be enough. In case that ever happens, you can buy an umbrella policy for another $1,000,000 in limits or maybe even more. Typically, "umbrellas" are bought by wealthier people who have a lot more to lose as a result of being found liable for damages. One feature of an umbrella policy is that in addition to paying on top of other policies, it is meant to fill in some gaps in coverage that may exist in those policies.