Umbrella Coverage and Underinsured Drivers

A lot of people have heard of umbrella policies. They’re frequently called PUPs (personal umbrella policies).

The WSJ recently ran an article about umbrella coverage: Umbrella Insurance Covers Worst-Case Scenarios There Are Now More of Them.

The article explained: “Umbrella insurance usually kicks in after the limits on people’s other policies are exhausted.”

And that’s what most people think. But it’s not always true.

A lot of people are blithely driving around thinking that they have a big umbrella policy so everything’s good.

By default umbrella coverage increases liability limits. But it doesn’t increase uninsured and underinsured motorist coverage unless you ask for it. And that’s a big deal.

Maybe the most important coverage you can have increased by an umbrella policy is uninsured motorist (UM) and underinsured motorist (UIM).

I’ve said it before. And I think it’s probably more true now than ever. At least 95 percent of drivers are uninsured or underinsured when it comes to a serious wreck.

So it’s vital that you let your insurance agent/broker know that you want your umbrella policy to cover not only liability but also UM/UIM.

I just checked rates today. It costs about $100/month to get a $2M umbrella policy and $200/month to get a $5M policy.

Most of us have homeowners coverage because we can’t afford to self-insure if our homes are destroyed. We really can’t afford to self-insure against the risk of getting hit by an uninsured or underinsured driver and suffering life-changing injuries.