Do I Need To Have An Umbrella Policy In Addition To My Car Insurance?

By Mike Anderson Posted in Car Insurance News

What Is An Umbrella Policy

An umbrella policy is an additional liability policy that can be added on to an existing home or car insurance policy. This policy would offer protection above and beyond your existing policy. An umbrella policy can not be purchased alone, it needs to be added on to another policy. It is there to protect your asset hence the “umbrella.”

Why You Would Need It

An umbrella policy offers an extra measure of protection over your car insurance policy. So, if you are in an accident where the medical expenses and damages cost more than your policy will pay out, then your umbrella policy would kick in. If your car insurance policy has a max of $50,000 per accident and a $50,000 max pay out for damages but you are in an accident where the medical bills exceed $50,000 or the repair costs exceed the $50,000 limit, then the umbrella policy would cover you over that amount.

This type of insurance addition may never be necessary but it only takes one bad accident to completely wipe you out financially. If you are of the better-safe-than-sorry school, then an umbrella policy would be an excellent addition to your existing policy.

Protecting Assets

Another major reason to obtain an umbrella policy is to protect your assets. If you have a substantial income or a small fortune saved, then you could be vulnerable to lawsuits. If you are in an accident and the other driver decides to sue you, your traditional insurance will not cover the whole of your assets. This can leave them fair game in a malicious suit. If you had an umbrella policy, however, the policy would have a larger cap amount, in turn protecting your bank account.

An umbrella policy can be purchased to protect your net worth. Unfortunately, in a lawsuit all assets, not just liquid ones, are open to the lawsuit.

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