Most personal insurance policies provide liability coverage to protect you if you are sued as a result of an injury you are responsible for, whether it is bodily injury or personal injury. Lawsuits can stem from auto accidents, boating accidents, slip and falls, libel, slander, etc. I have discussed the importance of liability coverage in previous posts, but what happens when the liability on your auto, boat, or home insurance policy isn’t enough to satisfy a judgment against you? If you carry a Personal Umbrella policy, you potentially have coverage for the amount of the judgment above your normal limits that would otherwise come out of your own pocket.

What is a Personal Umbrella policy you ask? It’s an excess liability policy above and beyond your personal insurance policies. Like an “umbrella” to protect you from the proverbial rainy day, this policy is specifically designed to provide additional liability coverage for those instances where the coverage on your primary policies (auto, home, boat, dwelling fire, etc.) is simply not enough to satisfy a judgment against you.

Here’s an example…let’s say you are at fault in an auto accident and have Bodily Injury Coverage with a limit of $250,000 per person/$500,000 per accident.  You are sued by the injured party and the judgement is $1,000,000. Your auto policy will cover $250,000 of the judgment. The remaining $750,000 will be paid through other means such as a lien on your home (if you own one), wage garnishment, etc., unless you have a Personal Umbrella policy.  If you have a Personal Umbrella policy with a limit of $1,000,000, then this policy will kick in after your auto policy is exhausted and cover the remaining $750,000.

There are certain requirements you must meet to purchase a Personal Umbrella policy. The biggest of these requirements is the minimum liability coverage you are required to carry on all of your underlying policies. Most carriers will require that you carry no less than $250,000 per person/$500,000 per accident on all auto policies. Home policies are typically required to have at least $300,000 in liability coverage. Boats and recreational vehicles are required to be insured and will also have to carry similar limits on the policies to those of the auto and home policies. Another requirement is good driving. Insurance carriers will look at the driving experience and driving record of those being covered on the policy, and can increase their rates or outright deny coverage based on these factors.

Personal Umbrella policies can be purchased in increments of $1,000,000 and are relatively inexpensive. Prices will vary based on the amount of risks being covered. The more homes, autos, boats, and recreational vehicles you own, the higher the premium will be.

You should contact your insurance agent to obtain more information on Personal Umbrella policies and see if you qualify for one. Anyone can be sued and being without enough liability coverage can be financially devastating.

Have you ever been in a situation when the coverage on your policy was not enough to cover a judgment against you?

The coverages here are described in the most general terms, and are subject to the actual policy conditions and exclusions. For actual coverage wording, conditions, and exclusions, refer to the policy or contact your agent.