An umbrella insurance policy provides an extra layer of protection for automotive and homeowners policies. Advantages of an umbrella policy include broader coverage and higher monetary liability limits than what a basic insurance policy offers. An umbrella policy can help save personal assets in the event of a serious accident resulting in costly medical bills or a lawsuit.

In the past, umbrella policies have been seen as suitable only for the wealthy. However, this is no longer true in today’s society that has been bombarded by lawsuits. If a person “appears” to have money, by the car they drive or the house they own, this could make them the target of a lawsuit. Awards of $1 million or more are common in liability lawsuits. If an insurance policy only allows $300,000 in coverage, the defendant's assets and possibly their future earnings would be expected to cover the damages.

Umbrella policy coverage ranges usually from $1 million to $10 million. The policies continue with coverage after a regular liability policy runs out. The liability coverage from the regular policy is used as the deductible for the umbrella policy. For example, if a person is found at fault and has to pay a $2 million settlement due to an auto accident, their auto insurance policy would pay $250,000 minus the deductible. The umbrella policy would pay the remainder of the cost, using the $300,000 already paid as the deductible.