insurance

Should you buy umbrella insurance?

You don't have to read the news regularly to know that Americans are lawsuit-happy. And while you may feel exempt -- after all, why would anyone possibly sue you? -- all it takes is one serious car accident to tip the scales. The protection? Umbrella insurance. Up next, what it is and who needs it. I'm Jean Chatzky, and this is Bankrate Bottom Line.

Umbrella insurance is like an umbrella -- hence the name -- for your other liability insurance policies, such as your car, home and even boat. It adds an extra layer of protection in the event that the amount of coverage you have on those policies is exceeded by a lawsuit.

Say you cause a car accident, and the other driver is severely injured, with medical bills topping the limits of your auto insurance policy. You could be on the hook for that excess, triggering an avalanche of debt -- unless you have an umbrella policy in place to cover it.

The best news here is that umbrella policies are extremely cheap -- around $200 annually for $1 million in coverage. So, if you're concerned about a lawsuit wiping out your assets -- and you should be if you have a home and retirement account -- it's a worthwhile buy.

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