Additional liability protection may be added to supplement homeowners and auto insurance policies. These supplemental personal liability policies are commonly referred to as “umbrella” policies because they fit over the top of existing policies as an extra layer of protection. These policies are relatively low-cost and are recommended to wealthier individuals who bear higher liability risks. Typical coverage ranges are $1 million to $5 million dollars and cover a variety of risks.
If damages exceeded the liability limit of your auto or homeowners policy an umbrella policy would cover the excess. It is important to ensure that “gaps” are covered. Liability policies have deductibles like homeowners and auto policies. The coverage of your auto and homeowners policies should be equal to the deductible of your umbrella policy. If not, your auto or homeowners policy may offer coverage up to $100,000 while your umbrella policy has a $200,000 deductible. This would leave you responsible for the $100,000 gap. In this situation you’d want to use some combination of raising your coverage or lowering your deductible to eliminate the $100,000 gap. Working through the same insurance company for these needs is an easy way of alleviating problems like these. Additionally, assuming reasonable rates, using the same insurer for multiple insurance needs often qualifies for a discount for consolidated underwriting costs.