Liability insurance protects your family if you are responsible for property damage or injuries to other people. Umbrella insurance can help if the costs exceed the coverage of your auto or homeowners’ policy.
You’ve prepared. You’ve planned. You’ve positioned your family for long-term success by diligently working to keep your personal finances in order.
A key part of your overall strategy should be making sure your insurance is designed to grow with your family and be ready in case of an emergency.
Open It Up
A personal umbrella policy (PUP) can help, but only about 20 percent of homeowners carry a policy. Too often, this is because they don’t understand what an umbrella policy is designed to provide.¹
Think of umbrella insurance as, well, an umbrella. These policies extend over your existing limits and coverage provided by other policies.
Say you have a teen driver who gets into an accident and the cost of injuries to themselves and others is $500,000. The bodily injury limit on your auto policy is $300,000. How will you pay for the other $200,000? That’s where an umbrella policy can help.
“A prudent person sees evil and hides himself; But the naive proceed, and pay the penalty.” Proverbs 27:12
Who Should Consider an Umbrella?
As a general guideline, if your net worth exceeds the maximum liability coverage on your auto and homeowner’s policies, you might want to explore an umbrella policy. Here are some other lifestyle factors that also might put you in a position to consider a policy:
- You entertain at home frequently and serve your guests alcohol.
- You have a dog, especially if the breed has a history of being aggressive.
- You have teenage drivers, or you personally tend to drive a lot more than others
- Your lifestyle “appears” wealthy to casual observers (expensive cars, jewelry, etc.)
- You enjoy higher-risk hobbies such as using boats, motorcycles, or snowmobiles.
- You are in a position where your thoughts, views, and perspectives may be published.
- Your home is the headquarters of a business venture.
Like most insurance products, the cost of an umbrella policy will depend on a variety of factors.
Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
When we work with clients and review their insurance needs, we often provide guidance on whether we believe an umbrella policy may be appropriate in their situation. In some instances, clients are comfortable with the coverage provided by their existing policies. In others, they take a closer look at the PUPs.
Do’s and Don’ts2
Here’s a list of items that are typically covered-and not covered-by a “PUP.”
Covered | Not Covered |
|---|---|
Bodily injury | Personal Belongings |
Personal injury | Business losses |
Property damage | Criminal acts or intentional omissions |
Landlord liability | Written or oral contracts |
¹Bremer.com, February 7th 2023.
²Allstate.com, May 2023.
