The basic personal auto insurance mandated by most U.S. states provides some financial protection if you or another driver using your car causes an accident
that damages someone else’s car or property, injures someone or both.
But to make the best decisions about purchasing other types of auto insurance coverage you might need, you’ll want to understand what’s covered, what’s not covered and what’s optional. In addition to understanding types of coverage, you’ll also want to consider coverage amounts.
Homeowners insurance provides financial protection against disasters or accidents. A standard policy insures the home itself and the things you keep in it.
Your standard auto insurance or homeowners insurance will provide you with some liability coverage. If you are sued, those policies will pay up to your policy
limits for legal judgments against you, as well as the related attorney's fees.
However, in our litigious society when a lawsuit settlement could very well wipe out your financial assets, you may want the extra protection for your assets that a personal umbrella liability policy provides.
An umbrella policy kicks in when you reach the limit on the underlying liability coverage in an auto, homeowners, renters or co-op / condo policy. It will also cover you for additional types of claims, such as libel and slander.
You can buy a $1 million personal umbrella liability policy for about $150 to $300 per year. The amount you pay decreases for each million dollars of coverage beyond that. Because the personal umbrella policy pays out after the underlying coverage is exhausted, most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before they will sell you an umbrella policy.