If you are sued beyond what your usual liability policies cover, you will be responsible for paying the remainder. Many people end up in big trouble this way, because someone legitimately or vindictively decided to "sue their pants off" and won the legal battle. Don't let this happen to you.
Umbrella coverage goes beyond the amount covered by your other policies to pay for fiscal damages up to several million dollars or more, depending on your policy.
Here's how umbrella coverage works: simply picture yourself holding your auto insurance policy in one hand and your homeowners' policy in the other hand. Both of these protect you up to a certain amount-once you pay the deductible, the insurance carrier will pay up to, say $100,000. But what if someone falls down your stairs and sues you for $500,000 in medical fees and lost wages? Now picture an umbrella over your head. The umbrella coverage kicks in to pay for the remaining $400,000, and you pay nothing out of pocket.
This is a simplified version of umbrella coverage. Employers and property-owners usually buy more coverage than individuals, because they have more to protect and greater risk. Entrepreneurs and professionals who work with the public often carry multiple types of insurance beyond their personal auto and homeowners' policies, as well as umbrella insurance.
