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An umbrella policy is a supplementary liability insurance plan that works in tandem with your existing coverage to beef up your protection against various risks. It both raises your liability limits and covers things that might be excluded in the base coverage.

What Does an Umbrella Policy Do?

Umbrella policyBecause it is a supplementary coverage, you can't have a standalone umbrella policy. According to Mountcastle Insurance in Winston-Salem, NC, umbrella coverage simply extends the liability portion of your existing business, home, or auto insurance policy. Liability insurance covers you should you injure someone or damage their property. It also pays for the legal expenses involved in defending a lawsuit, including lawyer fees, court costs, and judgment or settlement amounts. Typically, the minimum state-mandated liability coverage for auto insurance is between $20,000 and $40,000, while most homeowners policies provide at least $100,000. By contrast, a typical umbrella policy offers at least $1 million.

How Does an Umbrella Policy Work?

Your umbrella policy extends the limits of whatever insurance you already have. Thus, if you are in an auto accident that results in injuries, it raises the limits of your liability coverage. It does the same for your homeowners insurance. You simply file a claim on your base policy, and the umbrella coverage fortifies it.

However, insurers often require you to purchase more than the minimum amount of liability coverage on your home and auto policies. For auto insurance, you may have to buy $100,000 to $300,000 of liability coverage. For home insurance, that amount may be $500,000. Those policies must pay out before your umbrella insurance kicks in for the remaining amount, whether your limit is $1 million, $2 million, or more.

To learn more about how an umbrella policy will benefit you, contact Mountcastle Insurance in Winston-Salem, NC. With over 125 years of experience behind them, they will walk you through everything you need to know. Visit their website to request information, or call (336) 777-8500 to discuss your options with an agent today.

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