Imagine that you’re just a few years away from a well-deserved retirement. You’ve got a

sizable retirement account, plus a house and car that are fully paid off. Altogether, your

assets amount to a little over a million dollars. In short, life is pretty good.

Then, one day, you get into a car crash. Fortunately, you’re not badly hurt, and the damage

to your car is well within the limits of your auto insurance coverage. Unfortunately, the other

car involved in the crash is full of executives from a large company – and their injuries, and

the damage to the car, are much more serious.

A court rules that you are responsible for the accident and must pay for the damage to the other

car, the executives’ medical bills, and their lost wages for the time they were unable to work

after the accident. Altogether, you owe about a million dollars in damages. Your auto insurance

policy only covers the first $250,000 of that, so you’re on the hook for the remaining $750,000.

This could be a complete disaster for you – unless you have an umbrella insurance policy. This

kind of insurance takes over when your other policies run up against their coverage limits. In

this case, an umbrella policy would cover the extra $750,000 in damages and even pay your

legal bills – saving you from having your assets wiped out and your retirement snatched away

by a single unfortunate accident.

Source: https://www.moneycrashers.com/umbrella-insurance-policy/