Most of us are under the assumption that for protecting our lives all we need to have is the homeowners insurance and the auto insurance and we feel that this is all that is required to safeguard our assets and to cover up during accidents as well. However, we have to understand that it is important to be prepared for the worst, which in this matter could be that we are sued for a large amount of money due to an incident or accident and in turn, the amount of money charged is so huge that it crosses over our liability insurance limits. All of us feel that we are not the ones who are affected by catastrophes but over the course of time, you will start believing that catastrophes can happen to anyone of us and thus, it is important to be ready for it than be sorry about it later. Thus, this is the main reason why you should deal with the risk factor in your life by going in for umbrella insurance.
In order to understand this aspect of insurance in a better manner, just assume that you become involved in a car accident and not only is your car severely damaged but your driver is also badly hurt in the process. So if your coverage limit is $500,000, you could be sued for probably $1,000,000 and if you are not a big shot, then to repay off the rest of the $500,000, you need to sacrifice a lot of your savings account, assets and your future salary can also be jeopardized in this process. You can also seek guidance of Your Personal Financial Mentor in order to understand the concept of umbrella insurance because he can guide you practically and can help you choose the best policy according to your financial requirements.
Thus, this is when umbrella insurance comes into the picture which is the extended liability insurance and this helps you during such difficult times by paying up for all the excess over the normal liability limit. In the above-mentioned instance, if you have umbrella insurance for yourself, then this will help you to pay the rest of the $500,000. The amount for your umbrella insurance can range from $1,000,000 to $5,000,000. Thus, with respect to the above situation, firstly, your car insurance liability comes into the picture and for the difference; you can make use of the umbrella insurance.
One important thing to be understood over here is that umbrella insurance is not just for the wealthy people, but because of its affordable nature, all of us can have one for our needs. Anytime an insurance claim is filed for, first the regular insurance plan is used up and then the umbrella insurance is considered. All those individuals who have a lot of assets should certainly go in for the umbrella insurance policy.
I carry an umbrella liability policy for $1 milliion dollars. That way I have a lawyer from my insurance company between me and the other party. The insurance company has to lose a million before they can touch my assets.