Personal Umbrella Policy
Also known as Excess Liability Insurance, a personal umbrella policy (PUP) is a type of insurance that provides liability coverage over and above your homeowner’s or automobile insurance policy limits. So, if your selected liability coverage is insufficient to cover the cost of damages from an accident that you cause (or an incident that occurs on your property), a personal umbrella policy kicks in as soon as your other liability policy limits have been reached. In short, the umbrella policy can protect you when your automobile or homeowners insurance isn’t enough.
Accidents Like This Happen Every Day!
Let’s say you’re at fault in a car accident that injures another driver, and your regular automobile insurance will cover the other driver up to the limit you chose when you bought the policy, for instance $100,000. But what happens if the other driver is seriously hurt enough that $100,000 is not enough to cover the other driver’s medical treatments?
In this case, he could (and probably would) sue you, which means your personal assets would be at stake. Now imagine if that injured driver was a highly paid professional, such as a lawyer, doctor, engineer, etc. In addition, suppose the accident you caused resulted in his inability to perform job for six months or longer? Once he sees a lawyer, expect that he’ll be suing you for (let’s say) $1 million to cover the loss of earnings, ongoing medical bills and therapy treatments, etc. Even worse, what if he or she were permanently disabled and could never work again?
Your automobile policy will certainly cover the initial $100,000, but where would you come up with the remaining $900,000? This is where a personal umbrella policy comes into play. It covers the additional costs when your insurance isn’t enough. This extra policy protects your bank account, home, and other cherished personal property, which might otherwise be whisked away from you by the courts.
Knowing Your PUP Options
In most cases, personal umbrella policies are available in million dollar increments, from $1 to $5 million. Beyond covering your liability costs, a personal umbrella policy could also cover attorney costs and lost wages. While PUP coverage is not required, it offers increased protection in the unfortunate incident of an accident.
For somewhere in the range of $150 to $350 per year you can usually purchase an additional $1 million personal umbrella liability policy. If you want or need more protection, usually the next million will cost less, perhaps about $75, and $50 for every million after that.
Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, most insurers will want you to have about $250,000 of liability insurance on your auto policy and $300,000 of liability insurance on your homeowners policy before agreeing to provide you with an umbrella liability policy for $1 million or more, of additional coverage.