Most homeowners have a homeowner’s insurance policy, as it is a requirement when financing a mortgage with a bank. Homeowner’s insurance, also known as hazard insurance, protects against the loss of a home to fire or other designated perils and includes coverage of home contents, personal liability coverage, and loss of use.

Automobile liability insurance covers you when you are involved in an accident. Most policies provide up to a maximum of $500,000 in coverage, where an umbrella policy can increase that limit by an extra $1 million or more, depending on the amount of financial protection you want. That way by adding umbrella insurance, you are likely to have the necessary limits to cover you in a serious accident. An umbrella expands coverage in the event a legal claim is filed against you from any involved parties.

An umbrella policy can cover claims for which you have no insurance as well as providing an additional amount over your underlying automobile and homeowner’ s liability limits. Most people buy automobile and homeowners insurance from the same insurance provider because they receive a multiple coverage discount. Therefore, umbrella coverage would cover any liability for the home and automobile as well as any automobiles, boats, recreational vehicles, and other items that fall under the umbrella. The primary purpose of an umbrella insurance policy, then, is to protect your personal assets from liability claims.

For the most recent data available, the National Highway Traffic Safety Administration reported that vehicle crashes were the 11th leading cause of death for the general population in the United States in 2009. For those aged 4, and all ages 11 through 27, motor vehicle crashes continue to be the leading cause of death. With over 5.5 million car crashes annually, there were more than 30 million injuries with nearly two million people requiring hospitalization for injuries they sustained.

If the number of vehicle crashes were not enough to have you consider adding umbrella coverage, certain aspects of your home may also warrant added liability coverage. Owning a home with a swimming pool or trampoline, for example, is a good reason to consider an umbrella policy. If an accident should occur, extra liability coverage will help cover court costs and any damages up to the liability limit of the policy.

Without umbrella insurance coverage, you would be personally responsible for paying off any damages of an awarded personal injury and other related costs included in a liability claim. Just one unfortunate event can result in a catastrophic financial outcome for you and your family.

Available in increments of $1 million, umbrella insurance can protect your family from financial ruin. Your insurance agent or broker will be more than happy to discuss umbrella policy alternatives with you given your personal situation. One incident can pay for the cost of the premium many times over. Despite the fact that umbrella policies are quite affordable, if you are cash strapped, you may want to consider increasing your deductible on home and auto insurance to give you the cash necessary to protect you and your family from a successful liability claim.