Why do I need a Personal Umbrella Policy?

One of the most common questions many insurance professionals get, is “why do I need a Personal Umbrella Policy, what does it cover?” The simple answer is excess liability. Whether it is excess personal liability or automobile liability, excess liability is the primary function of a Personal Umbrella Policy.  In the past, well-meaning insurance agents would tell their insureds that umbrella coverage is “extra insurance”, and this led many people to believe that the umbrella policy was providing extra coverage that home and auto policies don’t cover.  Within PCS at CAL, we have received questions such as “I know I don’t have jewelry scheduled, but does my umbrella cover any jewelry?” and “I remember I didn’t select rental reimbursement, but I’m wondering if I may have some under my umbrella policy”? The answer to both of these questions is no. A Personal Umbrella is not intended to provide ‘throw-in coverage’, it is intended to protect your assets and protect you from wage garnishments in the event you are found liable for damages to another. As with all insurance, there are exclusions. For example, although bodily injury to others is covered by an umbrella, intentional bodily injury to another is not.

We’ve compiled some real-life examples of when umbrella coverage has been critical:

  • $53.6 Million awarded to a woman injured in a car crash where the responsible driver hit her car head on. Settlement was for medical bills and emotional distress. (Ace Private Risk Services)
  • $10 Million awarded to a 28-year-old engineer when he dove into a swimming pool, struck his head and became quadriplegic. Payment was made for medical bills and loss of future income. (Gallen Insurance)
  • $11.3 Million awarded to a Florida woman who won an internet defamation lawsuit. The defendant had called the plaintiff a “crook” and a “fraud” on a website. (Ace Private Risk)
  • $10 Million paid to a child that was playing at a friend’s house for a playdate. The family dog bit the child requiring facial reconstruction surgery. Payment was for medical bills and emotional distress (Bancorp Insurance)

In the above circumstances, if there had not been Personal Umbrella coverage in place, the liable parties could have had their wages garnished for decades, have their bank account levied or even faced property seizure to recover the judgement. If you would like to review your umbrella coverage or are interested in discussing how an umbrella may help protect you, please reach out one of our Private Client Advisors