Personal Umbrella Policies are liability insurance policies with very high limits of protection, typically starting at $1,000,000. They are designed to add a layer of protection above other kinds of personal liability coverage such as the liability protection found in a personal auto, homeowner or boat insurance policy. These kinds of policies are meant to protect you should you be deemed legally responsible for injury to persons or property. Personal injury can include non-physical injury like libel or slander.
Personal Umbrella provides excess coverage above the limits provided by underlying personal lines policies and also dips down into gaps that may fall in between coverage provided by those types of policies. Personal Umbrella is sometimes used incorrectly to refer to Personal Catastrophe Liability (PCL) Insurance. This type of policy only provides excess limits of protection above underlying policy coverage; it does not provide "gap" coverage. If you don't have underlying policy protection the PCL policy will usually not provide insurance.
Why would you need a Personal Umbrella? There has been a trend underway in the United States toward more lawsuits and court and jury awards can be large. These judgments can include punitive damages and special compensatory judgments for loss of consortium, pain and suffering and other intangible losses. Liability insurance is meant to protect your assets and income, both current and future, from such awards. Those of us with significant assets or income or the expectation of either in the future, should give serious thought to supplementing our auto, homeowner and other liability protection with a Personal Umbrella Policy.
Certain pursuits or risks inherent in your lifestyle or family life cycle can increase the possibility of lawsuits or losses and accidents. For example, if you serve on a board of a non-profit organization, you have a much higher public profile than an average person and may be a target for lawsuits. Also, people have a tendency to sub-consciously hold certain individuals to higher standards of conduct. Examples here might include clergy, counselors, coaches and youth instructors. When that standard of conduct is not met a lawsuit can result. The Personal Umbrella Policy will exclude liability arising from most business or professional pursuits. But an Umbrella or PCL usually will insure against lawsuits and damages that occur due to personal pursuits that may happen because of expectations resulting from professional status.
Certain lifestyle choices also increase the risk of lawsuits. Obviously there is a big difference between the possibility of a drowning death on your premises when a swimming pool is present vs. a pool-free home; similarly for the odds of a serious spinal injury increase with a trampoline in the yard. You will want to take all the necessary safety measures when your home has leisure amenities like those mentioned and you probably do. But it may also be worth protecting yourself against the unexpected with a Personal Umbrella Policy.
The risks faced by you and your family change over time and sometimes quite dramatically. You may not realize it, but that decision to trade your sedan for a mini-van so you could cart your kids and their friends around, came with some risk implications. The exposure to liability loss is much greater the more people you regularly have in your vehicle. Here are a few family life cycle events that can change your needs for liability protection:
- Increase in income
- Appreciation of assets, including your home
- You entertain more frequently and serve alcohol to guests
- Inexperienced drivers behind the wheel of your car or the wheels of your cars
- You commute to work due to a recent move
- You frequently take long weekend trips to visit kids in college or aging parents
- Regularly carting around groups of kids in your mini-van or SUV
- Large inheritance
The list is not all inclusive, of course, but should give you some idea of what to look for as you think about your current protection levels.