This type of plan is incredibly helpful when you are faced with a serious disaster resulting in extensive damages or injuries, as well as when you are slapped with some large lawsuits. Umbrella insurance can be a little tough to understand without examples. Let’s say you’re driving home from a late work shift, fall asleep while behind the wheel, and drive into someone’s home. This accident resulted in $300,000 of damages. Your auto insurance has a limit of $100,000 which the carrier will pay towards repairs. However, that leaves you with a balance of $200,000 that you’re now personally responsible for paying. If you can’t cover the cost, then you’ll probably be facing a civil lawsuit from the homeowner. There’s just no way of getting out of the costs. So how will you cover that $200,000 bill?

If you had an umbrella policy then you would have an easy answer to that question. You see, an umbrella policy will take care of that extra $200,000 that your car insurance wouldn’t cover.

Maybe you figure it’s just easier to get a higher limit auto insurance policy and skip the umbrella insurance. Frankly, that’s not really cost-effective. Umbrella insurance is meant for the kind of costly disasters you hope not to encounter. The beauty of an umbrella is if you do have a turn of bad luck then you’ll have back-up coverage to meet your obligations and continue on with your life. Umbrella insurance can protect against property damage liability and bodily injury liability, as well as false arrest, detention, libel, slander, malicious prosecution, shock and mental anguish, or imprisonment, among other personal liability matters.