This is an insurance contract designed to accomplish two goals. First, it increases liability protection beyond what you have in your homeowners and automobile insurance policies. Second, it aims to fill in gaps in your liability coverage since some things are simply not covered by automobile and homeowners policies – for example, libel and slander. Together with homeowners and automobile insurance policies, a personal umbrella policy gives you the highest level of protection.
In the past, the people who purchased personal umbrella liability policies were wealthy, with sizable amounts of personal assets that would be at risk in a lawsuit. However, our society has become more litigious, and many people desire more liability insurance than what is provided under their homeowners and automobile insurance policies. How much protection you want against potential lawsuits is a choice you should make based on your personal circumstances and what you need to feel comfortably protected.
Before we discuss the contents of the typical personal umbrella liability (PUL) policy, it should be noted that these contracts can vary substantially from one insurance company to another. Therefore, when you are comparison shopping, you should look closely at the extent of the liability protection provided under each PUL policy you consider. But there are several common characteristics in most PUL insurance policies. First, PUL policies only pay liability claims when the policy limits on the underlying insurance policy are exhausted. For example, suppose you are found negligent in an automobile accident and the court requires you to pay damages of $500,000. Your PUL insurance policy will only pay that portion of the $500,000 that exceeds the policy limit in your private passenger automobile insurance policy. Second, a PUL insurance policy is going to provide broad coverage.