We have all heard stories where someone gets sued for a huge amount, but the insurance company only covers a certain amount. The Insurance Company goes to court for the policy holder, but the courts award more money than the face value of the policy.
The Insurance company pays up to their limits and the lawsuit requires the policy holder to come up with the difference. The policy holder inevitably does not have that much in liquid assets and thus, they lose everything they have. Why did this have to happen?
Well, because the policy holder had not considered this scenario and did not buy enough insurance. To prevent this problem two things should be considered; one, have your current policy audited once in a while by someone who knows the ropes of the insurance industry; and two, you need to consider getting an umbrella policy that covers all your insurances from their limits to a much larger number, perhaps a million, five-million or more depending on your total net worth and exposure.
Now then, the great thing about an umbrella policy is that they start only if your other insurance policies max out and they are not that expensive to purchase. In the business world these are quite common ways to protect your company, for individuals they are fairly common with high-net-worth individuals.
Why? Because, in this day and age sometimes a jury or court will award an insanely high amount and this can completely wipe out an individual's life savings. And that is why you need an umbrella policy to protect you. Think on this.