For thousands of years, people across the world have been using umbrellas to protect themselves from the rain.Interestingly, the word “umbrella” is also used to refer to a type of insurance.Here’s what you need to know.

  What Is Umbrella Insurance? A personal umbrella policy (PUP) is a type of liability insurance designed to kick in when a liability limit on a regular auto, homeowners or renters insurance policy is met.According to DMV.org, umbrella insurance generally covers personal injuries sustained either on your property or in a car accident due to your fault.It may also cover property damage caused by your child, your pet or by yourself in a car accident.

In addition, it can provide protection for liability for libel and slander.So Why Would You Need Umbrella Insurance? If you’re involved in a car accident or if a guest is injured in your home, you can get sued.A settlement or penalty, as well as the costs of legal representation, can swallow up your financial assets overnight.

Of course, you have a certain amount of liability coverage in your auto, homeowners or renters insurance — but oftentimes, that’s not enough.In this type of situation, an umbrella insurance policy can help protect your assets.Once the liability coverage from your other insurance policy is exhausted, the coverage from your umbrella insurance comes into play.

Let’s say you’re involved in a car accident, and the other driver sues you for $2 million.If you reach a settlement in which you agree to pay $1 million, your auto insurance pays up to its liability limits — $250,000, for example — and then if you have a $1 million umbrella insurance policy, it covers the remaining $750,000.What to Consider When Purchasing Umbrella Insurance When you’re thinking about buying umbrella insurance, you need to consider these points to determine your needs and what you’re trying to protect:   Talk to An Advisor If you’re interested in purchasing a personal umbrella policy, then it’s a good idea to speak with a knowledgeable insurance agent who can evaluate your needs and advise you on your best options.

Talk to your local Bolder Insurance Advisor to learn more.This article provided by Encompass Insurance, A Bolder Insurance Partner