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.
How Umbrella Insurance Works
To understand how umbrella insurance can help, consider the following scenario. If a driver runs a red light and accidentally hits another car, there might be significant damage to the vehicle and several people might be injured. With car repairs totaling $50,000 and the treatment of the injuries eclipsing $500,000, the driver at fault may be liable for expenses that go far beyond the coverage limits of their insurance.
An umbrella insurance policy will pick up the additional liability costs beyond the limits of car insurance coverage.