What is a Personal Umbrella Policy?
A personal umbrella policy (PUP) is a type of insurance that provides liability coverage over and above your automobile or homeowners policy. So, if your liability coverage isn't enough to cover the damages of an accident you cause or an incident on your property, a personal umbrella insurance policy kicks in right where your other liability underlying limits have been reached. An umbrella policy can protect you when your automobile or homeowners insurance isn't enough.
To better understand how a personal umbrella policy works, here's an example: If you're at fault in a car accident that injures another driver, your regular automobile insurance will cover the other driver up to the limit you selected, say $250,000. But what happens if that limit is not enough to cover the other driver's needs?
If the other driver's injuries are severe, he may require benefits beyond the $250,000 your policy covers. In this case, he could sue you, which means your personal assets would be at stake. This could be a small amount, but imagine if that injured driver were a surgeon or another high paying professional. What if the accident you caused resulted in an injury that kept him from doing his job for six months? Suddenly, he's suing you for $1 million to cover the six months he's away from work.
Your automobile policy covers the initial $250,000, but where would you come up with the remaining $750,000? A personal umbrella policy can cover the additional costs when your insurance isn't enough. The PUP could provide the additional coverage you need so that you don't get stuck trying to pay the remaining balance yourself. This extra policy could protect your bank account, home, and other personal property.
If you are ever sued, your standard homeowners or auto policy will provide you with some liability coverage, paying for judgements against you and your attorney's fees, up to a limit set in the policy. However, in our litigious society, you may want to have an extra layer of liability protection. That's what a personal umbrella liability policy provides.
An umbrella policy kicks in when you reach the limit on the underlying liability coverage in a homeowners, renters, condo or auto policy. It will also cover you for things such as libel and slander.
For about $150 to $300 per year you can buy a $1 million personal umbrella liability policy. The next million will cost about $75, and $50 for every million after that.
Because the personal umbrella policy goes into effect after the underlying coverage is exhausted, there are certain limits that usually must be met in order to purchase this coverage. 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 selling you an umbrella liability policy for $1 million of additional coverage.