What is it?
A personal umbrella policy (“PUP”) provides an extra layer of protection by adding extra liability coverage over and above another insurance policy, such as your primary home or auto insurance policies. PUP coverage comes into play when your underlying liability limits from another policy have been reached. In essence, it is designed to help protect your assets in the case of a catastrophic claim. So for example, say you get into an auto accident and you are sued for $750,000 but your auto policy has a maximum bodily injury limit of $500,000. If you have a PUP policy, it would then kick in and pay the additional $250,000.
A PUP policy can provide additional coverage in the following areas:
- Bodily Injury – If your neighbor falls off a ladder helping you hang Christmas lights and breaks their arm, an umbrella policy could help with medical bills that exceed the liability limits of your homeowner’s policy.
- Injury to Reputation – This refers to cases of libel, slander, or defamation of character. With the increased usage of social media, this can be an area of greater concern.
- Property Damages
- Court Costs – Given the litigious state we live in, a PUP can give you peace of mind that legal fees for a catastrophic event may be covered.
The liability limits of a PUP typically range in million dollar increments from $1 million to $5 million dollars, so if you have significant personal assets you may want to consider purchasing this coverage. They can sometimes be bundled with either your auto or home insurance policy or you can also purchase a stand-alone PUP. One of the advantages of bundling is that you may be eligible for a multi-policy discount.
Do I need an umbrella policy?
A PUP typically provides greater liability protection for situations covered by your underlying policy, as well as protection of other risks. Everyone’s situation is unique, so it is up to you to decide if this coverage is right for your needs. Some follow the line of thinking that if the total value of your assets (your home, vehicles, investments, etc.) is greater than the collective limits of your insurance policies you may need an umbrella. Another thing to consider is that there are some activities and lifestyle choices that have greater inherent risk; therefore, if you engage in them frequently you may also want to consider an umbrella policy. Some examples include, but are not limited to, owning and renting out multiple properties, hosting frequent large parties or even just having a teenage driver. The bigger target you are for lawsuits, the more strongly you should consider purchasing a PUP policy but it all comes down to your own risk tolerance.
To learn more about personal umbrella policies please give us a call!