Let’s say you’re at fault in a car accident that injures another driver, and your regular automobile insurance will cover the other driver up to the legal limit you selected when you bought the policy. But what happens if the other driver is seriously hurt, and their medical costs exceed the $100,000 limit of your policy?
In this case, he could (and probably would) sue you, which means your personal assets could be at stake. Now imagine if that injured driver was a highly paid professional, such as a lawyer, doctor, or engineer, so that his loss of income due to the accident is quite significant. Once he sees a lawyer, expect that he’ll be using you for possibly $1 million to cover the loss of earnings, ongoing medical bills therapy treatments, etc. Even worse, what if he or she were permanently disabled and could never work again?
Your automobile policy will certainly cover the initial $100,000, but where would you come up with the remaining $900,000? This is where a personal umbrella policy comes into play. It covers the additional costs when your insurance isn’t enough. This extra policy protects your bank account, home, and other cherished personal property, which might otherwise be whisked away from you by the court.