Insurance is a risk reduction tool used in our private and business lives. It is founded on the basic premise that a large group of individuals will cover a catastrophic event for one of the members sometime in the future. In general, the insurance company uses actuarial science (law of large numbers) to calculate the financial cost of accidents over a given period of time.
Umbrella insurance is additional coverage (in increments of $1,000,000) that protects the management and the company in a large lawsuit situation. It is generally associated with liability coverage, professional insurance, and sometimes with workman’s compensation.