Being a homeowner requires you to take precautions to protect yourself from large claims that may be over your policy limit. These claims can ruin you financially by taking your personal assets and savings. The purpose of umbrella policies is to protect you from something like this happening.
These types of policies give you excess liability coverage and provides additional protection for damages you have incurred. Umbrella insurance serves as a back up insurance policy if the primary policy cannot handle an extremely large claim. In a sense, it extends the coverage of your primary policy.
The number of lawsuits has been on the rise during the last 50+ years. Even frivolous lawsuits against you will require you to pay legal fees, which may be more than your original policy allows. Umbrella policies can cover these additional legal fees and trial costs.
The primary purpose of an umbrella policy is to make sure your out of pocket expenses with regards to a claim are kept low. The coverage will kick in until the coverage provided by your primary policy is exhausted.
There is a misconception that umbrella insurance is only for the wealthy. This is not the case at all. Any policy holder having considerable savings or investments would be best served with an umbrella policy. The price is relatively inexpensive and can protect your assets from liquidation.