Thoughts on umbrella coverage

Kiplinger, a personal finance magazine, has an interesting article on why people with income of over $100,000 or assets over $1 million should purchase umbrella coverage.

Umbrella coverage is coverage above your regular insurance. For example, you might have an auto policy and a homeowner's policy that each have a limit of $300,000. An umbrella policy would kick in if the damages exceed that amount.

The article states that umbrella insurance will cover your legal fees if you get sued. In most cases that is incorrect. Generally, your primary insurance (such as auto or homeowner's) will cover your legal fees, although there are some rare cases when primary insurance does not apply and umbrella insurance does apply. There are also some primary policies in which legal fees deplete the coverage limit.