It is often said that proper insurance can keep a bad day from turning into a bad life.  A personal umbrella policy may do just that.  Lawsuits are so prevalent today and since no one can predict the size of a court award to an injured person, umbrella insurance policies are an essential part of your liability insurance protection.

Umbrella policies are sold to go over and above your underlying insurance policies such as auto, home and boat.  If your underlying policy is exhausted, the umbrella kicks in and adds additional liability insurance coverage to protect your assets and future earnings.  Umbrella policies can also dip down to pick up coverage that did not even exist in the underlying liability insurance policies.  These could include claims of false arrest, libel, slander and invasion of privacy.

Most financial advisors require an umbrella insurance policy as one of the primary foundation blocks of any sound financial plan.  After all, there is really no sense in building your wealth if you have huge gaps in your defenses that could let it all slip away.  Umbrella policies are sold in increments of $1 million dollars and typically range between $1 million – $5 million.

Even if you have less than $1,000,000 in assets, you should consider an umbrella as a way to protect your assets and your future earnings.  If you are sued, the court could demand a judgment in excess of the coverage you have on your auto and home insurance policies.  Defense costs, even if you win your case, can be financially devastating.  An umbrella insurance policy can absorb the cost of your legal defense as well.   A $1 million umbrella is suggested for people with annual earnings up to $100,000 or up to $1 million in assets.