Unfortunately, accidents happen. And when they do, the victim usually tries to blame someone else.
Under the U.S. system of tort liability, courts can hold injurers liable for many different types of torts, such as bodily injury, trespass and “personal injuries,” such as invasion of privacy, slander, libel or damage to reputation. Your homeowners policy covers both the costs of your legal defense and any court awards for this type of claim, while your auto policy covers you for liability resulting from accidents you’re involved in. The typical homeowners policy provides from $10,000 to $500,000 in liability coverage, while your auto policy might provide $500,000.
However, if you are found liable for causing serious injury, the sky-high cost of medical treatment and other claims, such as negligence, could quickly exhaust the coverage limits on these policies. Once your policy pays its limits, any remaining liability costs become your responsibility. That’s where umbrella coverage kicks in.
The typical umbrella liability policy can provide an extra $1-2 million in additional liability protection for only hundreds of dollars a year. You can buy policies with higher limits if needed; generally, the more assets you have to protect, the more coverage you need.