Wednesday, November 25, 2015

Why you need a Personal Umbrella Policy

You may think that you have all the auto and homeowner’s insurance you need. You have studied the issues carefully, examined your potentialliabilities and done a cost benefit analysis. Perhaps you have found that the state minimum auto insurance is enough for you. But there are often factors that you do not consider and issues beyond your control that could leave you in a financial crisis if your coverage does not give you all the protection you may need.

An Example

Mike, a software engineer accidently struck Susan, a store manager when she was on her bike. Susan suffered serious injuries that required serval surgical procedures and months of physical therapy. Although the accident was not her fault, her medical bills were in excess of $500,000. Mike had only minimum coverage which was not enough to cover her medical expenses so she was left with no alternative but to sue him for reimbursement. This involved paying legal fees out of her own pocket, up front. Mike did not have enough assets, so he has no choice but to declare bankruptcy. Since Susancould not get any reimbursement and was unable to work, she too had to declare bankruptcy. This was a case where everyone lost.

If Only

If Susan had, had a personal umbrella policy (PUP) with $1 million excess UM/MIM, that would have come into play after Mike’s minimum coverage was exhausted. It would have taken care of her medical bills and lost wages. Similarly, if Mike had, had a personal umbrella coverage, he would not have had to declare bankruptcy.

A PUP is an insurance policy that that provides coverage when an automobile or homeowner’s policy is not enough to cover liability. In other words, if you have caused an automobile accident or are liable for damages due to an incident on your property, a PUP will come into play when the limits of your auto or homeowner’s policy have been reached.

What Does PUP Cover?

Generally speaking, a PUP will provide for:
  • Liability coverage that is in excess of the limits of a home, auto, RV or watercraft policy
  • Coverage that can extend to all family members living in the same household
  • Coverage for rental properties that you may own
  • Coverage that can be worldwide
  • Personal injury coverage if you should be sued for liable or slander, false arrest, wrongful eviction, wrongful entry, violation of right to privacy and malicious prosecution
  • Payment of legal costs
The actual coverage will depend on the policy that is in place. PUPs are normally available in million dollar increments from $1 to $5 million.

There is no mandatory requirement for having personal umbrella insurance, but it is the simplest and most cost effective way to provide for the additional coverage that may be required. If you do not have a PUP or are unsure if the umbrella coverage you do have is enough, contact an insurance agent who will be able to work with you to find the optimum PUP coverage for your specific needs.

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