Before I became an insurance agent, I asked myself this very question. Consider it this way; if your standard insurance policy is for a rainy day, umbrella insurance is for a major storm! The day when someone hits you with a lawsuit for thousands, or even millions of dollars. Ever watch the news and think about how lawsuit-crazy this country is? Well they aren’t that crazy when you consider that most of them end up with in a settlement. The sad truth is, no one is immune to these lawsuits either, they can happen to anyone.

How Much Does Your Current Policy Really Protect You?

Let’s say you're in an auto accident which you are at fault for, and it ends up causing serious injuries to the driver and possibly even the passengers of the other vehicle. The typical auto insurance policy will have liability limits of $100,000 per person in the accident, and $300,000 per accident. Think about how far that $100,000 will go if everything goes wrong. If the victims need money for medical bills, lost income, or even pain and suffering then $100,000 will not be nearly enough coverage to have. In these situations, insurance is only responsible for paying anything up to your liability limits and the rest is considered your responsibility.

If you don't have high limits of liability coverage or have a combination of insurance and a large sum of cash on hand to pay the settlement, the court can order liquidation of your assets. While umbrella coverage my seem pointless, it’s not, especially for people who own homes and any other significant assets they need to protect. I’m guessing that you don’t to lose your home or family savings to someone you injure in an accident, but this situation could happen.

The Low Cost of Being Fully Protected

How can I afford something like this in the state of our current economy? A common misconception about umbrella insurance is the price. It’s cheap, only pennies a day and umbrella policies are extremely versatile. Not only do they provide additional liability coverage for your auto policy, they can also provide extra coverage for your homeowners or renters policy. You can also provide coverage for such items as motorcycles, ATV’s, boats, snowmobiles and motorhomes.

One major point to keep in mind about umbrella insurance however, if you are sued and punitive damages are accessed against you then those damages will not be paid by your umbrella coverage. Punitive damages are considered to be damages awarded to someone in order to punish the person being sued. Such damages are awarded when judge or jury perceives an act to be outrageous or totally reckless conduct.

Umbrella policies usually cost anywhere from $100 to $300 a year for as much as one million dollars in liability coverage. If you need more than $1 million limits, you can usually buy each extra $1 million of coverage for $100 to $200. Think of it this way. For just a few hundred dollars a year you can increase liability limits as much 5 to 10 times the normal coverage. Who wouldn’t like the sound of that right!

How do These Policies Work?

Umbrella policies actually "sit on top of", or are in excess of your liability coverage. Example, let’s your auto policy has a per-person liability limit of $100,000, but you cause $550,000 in damages for injuries and loss of income. In this situation your auto policy will pay the first $100,000 in damages and your umbrella policy would kick in the remaining amount.

Due to the fact that umbrellas provide coverage on top of other policies, most insurers will only offer umbrella policies if you have your standard insurance policies with them as well. However, this can usually work in your favor. Companies will offer better rates or multi-policy discounts when you group all of your policies together.

The idea of umbrella policies are simple and inexpensive so talk to your agent and educate yourself of them about before it’s too late. Don’t put your future, or the future of your family is jeopardy because you didn’t want to take the time to make sure you are fully covered in the event tragedy strikes. For more information or a FREE insurance quote visit Oregon Insurance Quote.