BY: John Smith, CIC
Personal Risk Management Advisor
jsmith@bankersinsurance.net | (434) 327-1642
Peace-of-mind begins with a personal umbrella policy. These policies protect personal assets from being used to pay a settlement if you or a member of your household is found liable for a large claim that exceeds other policy limits. They extend the coverage of homeowners, auto, watercraft, and similar base policies while also providing additional protection for injuries, property damage, and personal liability situations. They are low cost, and we recommend every client consider purchasing this safeguard.
Why You Need a Personal Umbrella Policy
Large Claims
We are seeing homeowners and auto insurance claims increase in size. These larger claims are driven by the higher cost of medical care as well as juries providing larger settlements. The value of each home or vehicle on a policy only represents a small fraction of the protection needed. In fact, often these are minor in comparison to a liability claim. We recommend at least a $500,000 liability insurance limit for homeowners and auto insurance, but claims can be larger. For example, a member of one of our client’s household recently rear-ended a vehicle carrying a family, resulting in a $1,450,000 payout. Because their auto insurance limit was $750,000, the personal umbrella policy paid the difference.
Net Worth Protection
State laws vary, but in Virginia if you or a family member is found liable, the only protected personal assets are retirement accounts. Everything else owned – tangible assets, savings, and investments – can be taken and wages garnished.
Coverage Gaps
A personal umbrella policy fills in gaps where base coverages leave off or simply don’t exist. Suppose you don’t have watercraft insurance but while on vacation your family rents a boat or jet ski. Such coverage would not exist on a home or auto policy and can even be questionable on a boat policy. But most personal umbrella policies provide incidental liability protection for “watercraft you own, borrow, rent, or use.”
Worldwide Travel Protection
Personal umbrella policies also go on vacation with you through worldwide travel protection. They follow you no matter where the incident takes place. Thus, if you rent a vehicle while abroad, liability protection (not physical damage to the rented vehicle) automatically exists.
Additional Personal Umbrella Policy Coverages
Libel and Slander
A personal umbrella policy provides protection for libel and slander, even if they occur on social media. For example, one of our clients witnessed an accident and posted their thoughts about it online. They were sued for libel and their personal umbrella policy provided legal defense for the case, which is an included coverage.
Additional Covered Parties
Protection extends to others in your household, including immediate family. This provides an extra peace of mind, especially those with teenagers. This extension of coverage alone makes a personal umbrella policy worthwhile. One of our clients had a child who accidentally caused a fire in their college apartment complex that spread to other units. Damages were close to $2,200,000, far exceeding any home or renters policy they had, but their personal umbrella policy covered them. Even domestic employees such as housekeepers, cleaners, cooks, and gardeners are protected for incidents that occur during employment.
Uninsured and Underinsured Protection
Some personal umbrella policies provide an extra auto protection if hit by an uninsured or underinsured driver. If the at-fault driver’s insurance is too low, the umbrella policy reimburses the client for the difference. For example, one of our clients had a green light at an intersection and was t-boned. Property damage, medical bills, and other claim costs were well over the $100,000 auto policy limit of the at-fault driver and the client’s own personal umbrella policy paid the difference.
Personal umbrella policies are available from $1 million to $100 million. And although a $1 million policy limit is a popular choice, contact your insurance agent to help decide the proper level of coverage for your lifestyle. Although personal net worth is a factor in deciding how much coverage is appropriate, insurance limits should be decided based upon the amount a claim could likely be. To properly protect assets, an insurance limit may need to be more than personal net worth.
A personal umbrella policy is a convenient and low cost means to increase liability protection for all base policies while providing additional protections as well. Questions on personal umbrella insurance? Contact your Bankers Insurance agent. We will help determine your risks and advise how to best cover them. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided their email address as well as a phone number that rings right on their desk.
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Personal umbrella insurance policies vary. Coverages mentioned in this article may or may not be present on all policies. Read your policy or consult your insurance agent for questions regarding your specific coverages.
Would like a quote on $500,000.00 umbrella insurance policy.
Mark, thank you for reaching out. We will have your account manager or sales rep reach out to you so they can work up a quote. All the best!