Bodily injury and property damage liability insurance protects us from claims as a result of our negligent acts. Liability insurance is included in many insurance policies such as homeowners and auto insurance. A personal umbrella policy (PUP) extends your protection (liability coverage) over the limits of those policies.
Why would you need additional coverage? If you were in a major accident where there were significant injuries to the other party, your auto insurance would cover up to the limits of the policy. But if the individual sustains an injury which limits the ability to perform their job or disables them, the medical costs could be extensive and the resulting judgment well beyond the limits of your insurance. To cover that judgment, the courts might take any other personal assets you have such as your home, investments or bank accounts.
An umbrella policy is available in million dollar increments from $1m to $5m and upwards if necessary. Since a personal umbrella policy can cover auto, homes, boats, recreation vehicles, etc. certain underlying liability limits are required. Consult your agent for further information.