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 when your other liability policy limits have been reached. In short, the umbrella policy can protect you when your automobile or homeowners coverage isn’t enough.
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 legal limit you selected when you bought the policy. But what happens if the other driver is seriously hurt, and their medical costs exceed the $100,000 limit of your policy?
In this case, he could (and probably would) sue you, which means your personal assets could be at stake. Now imagine if that injured driver was a highly paid professional, such as a lawyer, doctor, or engineer, so that his loss of income due to the accident is quite significant. Once he sees a lawyer, expect that he’ll be suing you for possibly $1 million to cover the loss of earnings, ongoing medical bills 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 court.
In most cases, Personal Umbrella Policies are available in million dollar increments, from $1M to $5M. Beyond covering your liability costs, a Personal Umbrella Policy can 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 PUP. If you want or need more protection, usually the next million will cost less, approximately $75, and then $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 additional coverage.