Insurance products are intended to help manage risks individuals face from certain unforeseen circumstances. When an insured person is found responsible for damages or injuries caused to another person, a standard homeowners policy or auto liability policy can provide some protection. However, this coverage can be woefully inadequate in case of serious injuries.
For homeowners insurance, there is often only$100,000 worth of liability coverage. For auto liability insurance, the legally required amount is only $25,000. Many will carry coverages well in excess of this coverage but even these larger amounts may be insufficient to cover serious injuries.
When the liability limit is reached, an insured could find themselves personally responsible for the remaining costs. In the face of catastrophic injury, even coverage of $100,000 may not cut it when one considers medical bills, future medical care, rehabilitation and even the loss of a career due to an accident-induced disability.
To help prevent an accident or injury from consuming one's hard-earned financial resources, additional protection can be purchased in the form of a personal liability umbrella policy (PLUP), also known as an excess liability policy. An umbrella policy will take effect once liability coverage has been exhausted. Rates for an umbrella policy can range from $150 to $300 per year for a $1 million policy, which is just a fraction of the premium charged for standard homeowners or auto coverage. Each additional million can range from $50 to $75 per year.
In order to obtain PLUP coverage, an individual must have minimum prior coverage limits. For instance, to qualify for PLUP coverage, a driver must have minimum auto liability coverage limits of $250,000 per person/$500,000 per incident. Assuming one meets these threshold requirements, an umbrella policy should be considered by those who have personal assets higher than their homeowner's liability or auto liability limits. Without this additional coverage, an individual may be forced to liquidate their assets or even have their wages garnished to cover legal judgments.
For those who already have a personal umbrella policy, it might be wise to occasionally reconsider the policy limits to avoid being underinsured. As one's assets grow over time, it is easy to forget that insurance needs grow as well. Personal umbrella coverage can truly live up to its name; providing an extra layer of protection on a day when circumstances not only rain, they pour.