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Why Your Client Needs a Personal Umbrella

Bulletin – Tuesday, November 18, 2014

One of the most important insurance policies you can sell is the personal umbrella policy, but many people are unaware they need one. This policy provides high limits of liability to protect you against a catastrophic liability loss. For example, a major car accident may injure numerous people or cause head injuries or death that will result in liability far in excess of the limits typically purchased in a personal auto policy. An umbrella policy sits on top of the auto and homeowners policies to provide higher limits of protection. In addition to providing higher limits, this policy normally pays for some losses not covered by the underlying policy, such as legitimate allegations concerning libel or slander.

Personal umbrella policies are growing in popularity. In the past, only wealthy individuals and families purchased this coverage. Today, middle-income families also may procure this policy for protection in our society's increasingly litigious climate. As the tendency to sue for damages rises and awards granted by the courts grow, the personal umbrella policy is increasingly seen as an insurance necessity, rather than a luxury. It is especially attractive because of its relatively low cost.

In particular, people with certain characteristics or who engage in certain activities have a higher-than-average need for a personal umbrella policy. These situations include the following:

 

  • Total assets are greater than your underlying liability limits.
  • You are financially responsible for the actions of a young, inexperienced driver.
  • Live in an exclusive and affluent neighborhood.
  • Have a high-profile career or high income.
  • Frequently host guests on your property.
  • Residence includes a swimming pool.
  • Own waterfront property, a farm, or a ranch.
  • Own watercraft, aircraft, or off-road vehicles.
  • Own numerous rental properties.
  • Engage in extensive international travel for pleasure

 

Indeed, one could even argue that a lower-income person needs an umbrella policy. Consider an apartment dweller who inadvertently starts a fire while smoking in bed, and the fire damages adjoining apartments. The smoker's liability exposure could be enormous in such a situation. So, once again, a personal umbrella policy is a wise purchase for people in nearly all income groups.

Get more personal lines insurance and risk management tips and ideas from IRMI.


Copyright 2014
International Risk Management Institute, Inc.

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