No, we don’t mean your rain-protection device; we’re talking about Excess Liability Insurance. Most Personal Insurance providers (for both automobile and property insurance) will offer a maximum liability limit of $2 million. While that may seem high and more than adequate, unfortunately, lawsuits that exceed that amount are not that uncommon.
An umbrella policy basically enhances the liability limit of all of your personal insurance policies if they are listed / scheduled within the umbrella policy itself. For example, an effective umbrella policy could be used to top up the liability limit of:
- Your auto insurance policy
- Your home and cottage policy
- Your boat insurance
- Your motorcycle insurance
If your umbrella provides an excess limit of $3 million, in effect your protection would then be $5 million in total, assuming all of your underlying policies (auto, home etc) carry a limit of $2 million.
So, how much Liability protection should one purchase? The answer is simple: As much as the insurance company will sell you! Keep in mind, if your liability limit is exhausted, your personal assets may be threatened.
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