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What is an Umbrella Liability Policy?

An umbrella liability insurance policy is an option for protection that not too many people are aware of. It is a secondary form of coverage, meaning it only kicks in when other forms of liability protection have already been exhausted. It is called an umbrella policy because it protects policy holders from liability threats in multiple areas of insurance. If you get sued and your renters, homeowners or auto insurance plan's liability insurance is not enough to take care of your entire financial responsibility, a personal umbrella liability policy would kick in to pay for the excess.

Umbrella liability policies kick in where other plans leave off. When the limits are reached on your primary liability coverage, your umbrella policy would become active and work on your behalf to meet your obligation. This type of plan also covers policy holders in libel and slander cases [1].

The cost of a personal umbrella liability policy is not usually all that crippling. A $1 million policy might cost somewhere in the range of $150 to $300 per year, with additional coverage available at extra cost [1]. Most insurers will require their customers to carry certain minimum levels of liability insurance on their various primary policies like renters and auto insurance before they will sell them an umbrella liability plan. This is to help minimize the risk they are assuming in taking on these customers under this type of policy. The reason the premium can be so low in an umbrella policy is that it is a secondary insurance form, meaning it only pays out damages after all primary forms have been spent.

Not all consumers even know about personal umbrella liability policies, but many who are aware that this insurance option exists do choose to take advantage of it. The low cost of the plans and the high limits of liability protection make it an attractive option for many policy holders.

[1] http://www.iii.org/individuals/auto/b/umbrella/ Retrieved 2010-03-06.

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