When you're involved in an auto accident, there's a chance the damages and losses will exceed your policy limits. When that happens, you'll be personally responsible for paying the overage. One way to protect against that possibility is to purchase personal umbrella protection (PUP), which will kick in with additional $1 million or more in coverage once your standard policy has been exhausted. Before deciding to purchase this type of insurance, though, here are two things you should be aware of to help you buy the right coverage for you.
Mind the Gap Between Policies
Because personal umbrella protection only covers damages and losses that go above and beyond your regular auto insurance coverage, it usually has a high deductible. This deductible is typically set at an amount that corresponds to the upper limit of a regular policy (e.g. $300,000). Most personal umbrella protection policies require you to have a minimum of $250,000 in coverage with your regular auto insurance policy to prevent coverage gaps, but you may still end up with one if you're not careful.
It's important to read your policy to learn how much the deductible is. If you get $250,000 in auto insurance coverage but the PUP has a $300,000 deductible, you'll be responsible for paying the $50,000 difference plus whatever the deductible amount is for your regular auto policy. Be sure to make the proper adjustments to your standard auto insurance policy to eliminate any gaps in coverage.
There are Some Things the Insurance Doesn't Cover
Personal umbrella protection covers a wide range of damages, including bodily injuries, property damage, and even personal injury claims against you (e.g. defamation). However, there are a couple of things the policy won't pay for.
The first is punitive damages. This is money the court orders the defendant to pay as punishment for his or her actions. It's typically awarded in cases where the liable party's actions were so egregious, the court felt the need to financially punish the defendant to prevent him or her from engaging in the behavior again. You're more likely to be ordered to pay punitive damages if you intentionally hurt the other party or were grossly negligent. Regardless, PUP insurance won't cover this amount, so you'll have to pay it out of your own pocket.
PUP insurance also doesn't cover any claims arising from your business, even if it's run from your home. If you use your vehicle for company purposes, your regular auto policy likely won't cover any claims either. Instead, you must have commercial auto insurance for any vehicle used for business purposes.
To find more info about personal umbrella protection, contact an auto insurance provider.