What Is A Personal “Umbrella” Insurance Policy?
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UPDATED: Sep 15, 2020
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While sometimes offered as a rider, an umbrella insurance policy is often sold as a stand-alone policy. Most insurers who offer this coverage require increased liability limits under existing homeowner’s or renter’s and automobile insurance policies before offering this coverage.
An umbrella policy provides liability coverage over-and-above the coverage provided under your homeowner’s, renter’s or automobile insurance. This is commonly referred to as “second-tier” or “second layer” insurance since coverage kicks in only after you exhaust other coverage (provided by the first-tier — your homeowner’s or renter’s or automobile insurance). Second-tier policies save money in the long run. They have a lower premium because a large majority of incidents will be covered by your first-tier coverage.
It is not uncommon today for someone to purchase one million dollars of coverage under an umbrella insurance policy.