Personal Umbrella Insurance: For Extra Liability Coverage
You already have auto and homeowner’s insurance, but do they protect you enough? A personal umbrella policy (PUP) supplements other forms of insurance with extended coverage limits that start at $1 million. In addition, personal umbrella insurance covers other forms of liability, such as libel and slander, that those policies don’t.
What Is Personal Umbrella Insurance?
Personal umbrella insurance is an extra level of liability coverage. Auto and homeowner’s liability coverage can be purchased with limits of no more than $300,000 to $500,000, depending on your insurer and the type of coverage. If your net worth is higher than that, your savings, the equity in your house and even future earnings are at risk if an accident or other injury results in a large judgment against you.
That’s where personal umbrella insurance can protect you. PUP policies start at $1 million in coverage and are available with limits as high as $5 million to $10 million, depending on the insurer.
So, for example, if you’re at fault in a car accident that results in serious injuries, you could be responsible for substantial medical costs, plus an award for pain and suffering. With the protection of a PUP policy, you’ll get coverage first from your auto insurance, and then your PUP insurance will cover the rest, after deductibles and up to your coverage limit.
PUP insurance doesn’t just extend the coverage of your home and auto policies. It also supplements the insurance policies you have for motorcycles, boats and other recreational vehicles. In addition, PUP insurance covers things that home and auto policies don’t, such as:
- Libel and slander
- False arrest
- Malicious prosecution
- Personal psychological harm and mental anguish
- Legal defense costs for covered losses
- Liabilities when traveling overseas
|Examples of covered losses|
|Your dog bites a neighbor’s child||You post a message on social media that someone considers libelous|
|A serious car accident results in severe injuries to several people.||A repairman house slips on the stairs in your home and has a disfiguring injury|
How Much Does Personal Umbrella Insurance Cost?
According to the Insurance Information Institute, you can expect $1 million of personal umbrella insurance coverage to cost between $150 and $300 annually. Each additional $1 million in coverage will cost $50 to $75 per year. This type of coverage is relatively inexpensive because it supplements other policies -- and because it covers against circumstances that are relatively unlikely.
Because it is a supplementary form of insurance, you must first get the maximum level of coverage available on your other liability policies before you can purchase personal umbrella coverage.
Who Is Personal Umbrella Insurance For?
Personal umbrella insurance is designed for people with high net worth and people who want to protect future earnings.
Does that describe you? Answering that question begins with an assessment of your assets: Total up the equity in your house, your personal savings, brokerage accounts, retirement accounts, the college fund for your children and other financial assets. Do they exceed the limits of either your auto or your homeowner’s insurance? If so, personal umbrella coverage is important protection for your nest egg.
You should also consider whether there are things in your lifestyle that increase the odds you will be liable for someone’s injuries:
- Your home has a swimming pool.
- Your home has a tree house, swings, or trampoline.
- You own a dog.
- You have teenage drivers in your household.
If you find your existing insurance policies don’t offer the complete protection you need, then a personal umbrella policy may be right for you.
Image: otsphoto /Shutterstock
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