There is a notion the umbrella insurance is only for rich people. But Mitch Freedman, CPA and personal financial specialist, said as long as a person can earn a livelihood, he or she should secure a coverage. It is designed to protect an individual from major claims and/or lawsuits; hence, guarding his or her assets and future. It also protects the holder against libel, false arrest, invasion of privacy, slander, vandalism, and the like.

Cost of an umbrella coverage varies depending on the risk. According to the Insurance Information Institute, an individual will pay between $150 and $300 every year for a $1 million coverage. But the Mitchell Freedman Accountancy head recommended obtaining more than $1 million policy if earnings are higher than $100,000 yearly or assets greater than $1 million. Other CPAs suggested carrying an umbrella policy between $3 million and $5 million for those who have rental properties. Daniel Morris, a CPA, said their clients get liability insurance limits which are as high as their net worth.

In case of an existing homeowners or car insurance policy, providers require a base coverage of $150,000 to $250,000 for auto insurance, or $250,000 to $300,000 for homeowners insurance. If you think the premium is expensive, you may opt to increase the deductible on your homeowners and car insurance policies for up to $1,000.

Still not convinced? Let this article count the reasons.

Shields you if someone is injured on your property and decides to sue you. This insurance will not only shoulder any related medical expenses, but also the legal costs if it is higher than the liability coverage on a homeowners policy.

Shields you from defamation, libel, or other types of cases excluded in a home or auto policy. Thanks to technology. Whatever you post on social media could lead to a lawsuit. This policy covers any legal expenses and settlement, as well as out-of-pocket legal costs, even if you win the suit.

Shields you if involved in a car accident and sued. If you have maximized your homeowners or auto insurance, the umbrella policy shoulders the rest of expenses.

Umbrella coverages differ from state to state. Therefore, it may not cover for everything and anything you may be sued for. There are exclusions and loopholes in these policies, so make sure to talk with your agent and fully understand its terms.