Personal Liability Umbrella Policy (PLUP) One of the insurance products that I am often asked about is the Personal Liability Umbrella Policy, or “an Umbrella” for short. An Umbrella policy is one that provides an “umbrella” of liability protection over your auto and home insurance. Umbrella policies are purchased in increments of $1 million and work with the auto and home liability coverage provided by your personal lines policies. While the mechanics of an Umbrella policy are fairly simple, whether or not one is for you is the question that more people have. While not everyone has an Umbrella policy, the people that own one are very satisfied. They really enjoy the peace of mind that the Umbrella policy provides. Think about it: being assured that if you were sued for something over which you believe you had no control would be covered $1 million above and beyond your auto or home policy. How much is this peace of mind worth? What usually gets people hung up is that one cannot just purchase an Umbrella Policy without a review of the underlying auto and home insurance. To qualify for the Umbrella, you need to have at least $300,000 worth of coverage on your home policy, and 250/500/100 on your auto policy, or some variation thereof (at least with most insurance companies). Many homeowners carry at least 100/300/50 on their auto policies, but to purchase an umbrella, the liability levels must be increased to the amounts I indicated above. Some companies require that you carry your auto and home insurance with them before they will write an umbrella policy, or else they charge a higher premium. The thinking is, they don’t want to take up where another company left off should the Umbrella Policy be accessed. They would much rather control the claim from start to finish. There is one other important feature that makes Umbrella Policies very attractive to certain consumers. Umbrella policies can be endorsed to include income properties. For an extra fee per property, the Umbrella can be expanded to cover each additional property. Apartments can also be included in some situations. So the big question is, should I purchase an Umbrella Policy? The answers is probably so. If you are a single person renting a single bedroom apartment with a ton of student debt and a car that barely runs, the answer is probably not. If you were in an accident, you would not be that big of a target. You don’t have many assets to protect. I’m not saying that it’s a bad idea, I’m just suggesting that your insurance dollars may be better spent elsewhere. If you are a homeowner, the situation becomes a bit different. You now have a very valuable asset. During the housing boom prior to the Great Recession, people were finding themselves millionaires on paper. Their home’s value had skyrocketed, and they were now in possession of a very valuable piece of real estate. They were now a MUCH bigger target than they were before. While the Recession wiped out much of the value of the real estate market, prices are starting to go up again. People who kept their homes through that difficult time are now starting to see their equity grow. Bottom line, they have more to protect. Are homeowners good candidates for Umbrellas? You bet! Over the years, I’ve seen that the presence of a Youthful Driver can increase, not only the occurrence of losses, but the severity of losses. Parents of Youthful Drivers should give extra thought as to whether or not an Umbrella is a wise investment in coverage and peace of mind. Another group of people for whom Umbrellas may be a wise purchase are people that are in professions that many people may perceive as highly prestigious, or if people have the perception that they have money. _This would include professionals like doctors, attorneys, or even business owners. Many doctors and other professionals, when they first start out, have a fairly low net worth since they probably have 10’s of thousands of dollars in student loan debt. While their net worth may be low, people perceive them as being wealthy. Prominent people in the community should also seriously consider purchasing an Umbrella Policy. Umbrella policies have made the news in past years when prominent people found themselves in situations that they would rather not have been. Former President Bill Clinton used his Personal Liability Umbrella policy to cover some of the lawsuits he experienced. You can check out the story here. http://bit.ly/22nZtdQ The final questions is, what does $1 million worth of Liability Insurance cost? The answer is (drum roll please…..) possibly under $250 per year. I tell people this figure, and many simply don’t believe it. They could get $2 million worth of coverage for under $375 per year. No joke. While there are several factors that weigh on the premium (number of cars, number of houses, presence of youthful drivers in the household, etc.), the rate is much more affordable than many people think. The biggest expense usually associated with getting an Umbrella Policy is getting the Liability limits on the auto insurance up to the appropriate levels. If you think that you may benefit from the peace of mind that owning an Umbrella Policy brings, feel free to contact my office at (661) 946-4224, or email me at dave@thedaveowens.com. I or my licensed staff will be happy to review your individual situation to see if an Umbrella Policy is for you.
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AuthorDave Owens, Owner/Agent. I have proudly served in the Insurance Industry for over 20 years. Archives
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