Or let’s say you’re hosting a party at your home and someone trips down the stairs. They could sue you for any injuries as well as emotional pain and suffering. While some insurance policies cover this type of personal liability, there are limits to what they can pay.
Once those limits have been met, your umbrella insurance policy will kick in. Think of umbrella insurance as a secondary policy, with your homeowners, renters or auto as your primary policy.
An umbrella policy will pay for your legal expenses and protect you if you lose the case. If you win, an umbrella policy would cover your lawyer’s fees.
If you’re sued and lose, the judge could award the plaintiff an amount that exceeds what you currently have. In this situation, the judge will usually allow the plaintiff to go after your future earnings until they receive what they’re owed. If you have an umbrella policy, the insurance company will pay so your salary isn’t garnished for years to come. In other words, an umbrella policy covers your future earnings as well as your current assets.