An umbrella insurance policy provides additional liability protection against major claims and lawsuits. This is for when the amount exceeds the limits of a basic insurance policy. This excess liability coverage can pay for bodily injury claims, property damage, legal fees, and other liability claims that you are legally responsible for. The main purpose of an umbrella policy is to protect your assets such as a home, cars, investments, bank accounts, etc… from being lost in the aftermath of a lawsuit.
In addition to personal liability, it is also possible for an umbrella policy to cover a business, including professional liability for one person. There is also an umbrella policy called errors and omissions often used by financial planners, real estate agents, accountants, and others in advice-providing industries. This insurance is protection from negligence claims made by clients seeking damages for alleged financial losses. These losses are usually due to an error or omission in the services provided. Malpractice insurance is similar, except it is an umbrella policy for medical professionals.
The concept of umbrella insurance might be confusing. Just talk to your insurance provider in detail before buying a policy. But mostly you should understand that this insurance is not like traditional insurance. For instance, a personal umbrella policy doesn’t cover flood damage, some types of property damage, or uninsured motorists. A professional umbrella policy doesn’t provide coverage for liabilities that fall under civil law.
Also, the amount of coverage needed will depend on how much risk you face. You will also need to consider your assets and future income or earning potential.