Navigate the website
Learning Resource Center

Protecting Your Assets with Personal Umbrella Insurance

You have worked hard to own a nice home, a car or two, and maybe even a boat. These assets are more than just markers of success; they also help provide financial security. However, all those assets can be at risk due to a liability lawsuit or an accident.

If you want to protect your assets from unforeseen events, getting personal umbrella insurance is something you should look into. Knowing you are protected beyond the standard insurance limits can give you peace of mind.

In this article, you will learn what a personal umbrella policy insurance is, how it works, and how to use it to protect your assets. 

Personal Umbrella Insurance in a Nutshell

Personal umbrella insurance, also known as a personal umbrella policy (PUP), provides liability coverage over and beyond your standard homeowners, auto, or boat insurance. It protects against massive and potentially devastating judgments or liability claims. An umbrella policy kicks in once you reach your other liability underlying limits of your standard policies.

This type of personal liability insurance can be beneficial if you are liable for claims larger than your auto or homeowner’s insurance coverage. For instance, if you own a boat, your umbrella insurance covers any costs beyond the maximum of your watercraft’s liability insurance coverage. 

Your umbrella insurance will also cover specific liability claims such as slander, libel, and false imprisonment. If you have a rental property, personal umbrella policy insurance will provide liability coverage beyond what your renter’s policy will cover.

How Personal Umbrella Insurance Works

Umbrella insurance will not only cover the policyholder but the members of the household as well. Below are some examples of scenarios where your personal umbrella policy can come in handy:

  • Your teen hosts a party while you are away. Someone brings alcohol, and one of the attendees gets arrested for driving under the influence on the way home, and you are sued.
  • Your dog attacks a passerby going for a walk. You get sued to cover lost wages, medical bills, and pain and suffering.
  • Your child gets into a fight and punches another kid, and breaks the child’s nose. The parents sue you.
  • Your child brings sandwiches to school for a field trip. Students who ate the sandwiches developed food poisoning, and their parents sued you.

What Personal Umbrella Insurance Covers

In essence, an umbrella policy insurance provides liability coverage for the following:

  • Incidents that occur outside the United States
  • Bodily injury to others
  • Property damage
  • Legal costs that can defend you in lawsuits related to bodily injury and property damage
  • Lawsuits such as slander, libel, defamation, and invasion of privacy

An umbrella insurance coverage also covers the following:

  • Malicious prosecution
  • Invasion of privacy
  • Wrongful entry or eviction
  • False arrest, detention, or imprisonment

What Your Umbrella Insurance Won’t Cover

Your insurance won’t cover damage to your property or injuries you will sustain. The following are the losses that your umbrella insurance will not cover:

  • Criminal acts
  • Business losses
  • Infectiousdisease (i.e., a lawsuit filed against you for giving someone a sexually transmitted disease)
  • Intentional injury or acts
  • Oral or written contracts
  • Damage due to terrorism, war, or nuclear radiation

Benefits of Getting a Personal Umbrella Policy Insurance

Below are some of the enticing benefits of getting an umbrella insurance policy:

Liability Protection

Umbrella insurance provides additional liability coverage when you are sued, and your standard liability coverage is insufficient to cover the damages you have been awarded.

Asset Protection

Your umbrella insurance can help protect your assets (i.e., your savings, car, home, etc.) from being seized to pay for damages awarded to you in a lawsuit.

Coverage for Different Situations

Umbrella insurance covers various scenarios, including defamation lawsuits, injuries on your property, car accidents, and more.

Affordable Premiums

An umbrella insurance policy is typically very affordable. This means you will enjoy significant protection at a low cost.

Worldwide Coverage

Typically, most umbrella insurance provides worldwide coverage. This can be especially helpful if you travel frequently.

Peace of Mind

Knowing you have additional protection if you are sued can give you peace of mind.

How Much Umbrella Insurance Coverage Do You Need?

When it comes to getting insurance, many people follow a rule of thumb: if your net worth is over $500,000, it would be smart to get umbrella insurance. But how much do you need to cover your money and lifestyle? Let’s do the math.

Ideally, your umbrella insurance policy should match your total net worth. This means if your total asset stands at $3 million, that’s also the amount of umbrella insurance you need. Most umbrella insurance policies start at $1 million. 

If the following applies to you, you will likely need more than $1 million in minimum coverage:

  • You have a public profile of wealth and success
  • You own properties
  • You own a luxury car
  • You serve on a nonprofit or board
  • You are involved in sports that could injure others, like skiing, hunting, etc.
  • You are a landlord
  • You frequently travel outside the United States

You need to also assess your chances of getting sued for something. Unfortunately, many people are quick to sue for even the smallest reason. Thankfully, you will have peace of mind knowing you are covered if you have an umbrella insurance policy.

Mistakes to Avoid When Purchasing Personal Umbrella Insurance

If you are considering buying personal umbrella insurance, below are some of the common mistakes you should avoid:

Not understanding the coverage

Your umbrella insurance protects you from lawsuits and large liability claims. While it covers expenses for property damage, bodily harm, and certain personal liability situations, it won’t cover everything. Make sure to read the fine print so you will have a clear understanding of what is covered and what is not.

Not reading the fine prints

Before purchasing umbrella insurance, read the policy carefully to understand your coverage clearly. Otherwise, you can end up paying for unexpected out-of-pocket expenses.

Purchasing the wrong amount of coverage

Many people don’t have a clear idea of the right amount of umbrella insurance they require. As mentioned earlier, it would be ideal to purchase coverage that’s equivalent to your net worth. This can help protect you from a lawsuit or huge liability claim.

Omitting or lying about an important information

When getting umbrella insurance, you must be truthful about your income and assets. If you omit or lie about critical information, you can risk getting your policy voided when the need to file a claim comes. 

Purchasing the first policy you find

Before you invest in personal umbrella insurance, make sure you shop around and compare policies first. Remember that not all umbrella insurance policies have been created equal, so make sure you find one that will suit your needs and budget.

Secure Your Financial Future with Personal Umbrella Insurance

Personal umbrella policy insurance provides additional protection for your assets and can help protect you from the financial consequences of unexpected events. While some will consider it an expense you can do without, the peace of mind that comes with knowing you have additional protection can be invaluable.If you are interested in learning more about how personal umbrella insurance can protect your assets and secure your financial future, contact Bennett and Porter Private Client today. Our team of trusted insurance agents and advisors  will help you explore your options and find the coverage that best fits your needs. Don’t wait until it’s too late – protect yourself and your assets by calling us today.