What is an umbrella policy primarily used for?

An umbrella policy is primarily used to provide extra liability insurance and fill coverage gaps. This type of policy offers additional protection beyond the limits of traditional insurance policies, such as homeowners, auto, or renters insurance. It can help protect the policyholder from major claims and lawsuits, covering legal fees, settlements, and other expenses that exceed the limits of the underlying policies.

The purpose of an umbrella policy specifically targets the potential for high-cost liabilities that standard policies may not fully cover. For instance, if a person is found liable for an accident that leads to significant damages or injuries, an umbrella policy can take over and provide additional financial support beyond what the liability limits of the auto or homeowners insurance would cover.

Using an umbrella policy effectively ensures comprehensive protection and peace of mind, particularly for individuals with significant assets or those who may be at higher risk for lawsuits.