What is umbrella insurance?
One way to avoid being underinsured without becoming overinsured is an umbrella policy.
An umbrella insurance policy provides additional liability coverage across your homeowners, auto and even boat insurance policy. It kicks in when you've maxed out your coverage limits on your primary insurance policies. Umbrella insurance also protects against personal injury lawsuits like libel or slander.
The best part? You can pad your policies with a higher coverage limit without spending significantly more. Depending on your insurer, a $1 million umbrella policy may cost you an additional $150 to $300 a year.
It's worth noting that insurance companies usually require policyholders to have at least $300,000 in liability coverage on their homeowners insurance policy and $250,000 on their auto insurance policy before they sell you umbrella insurance.