Umbrella Policy Defined


A personal liability umbrella policy (PLUP) is one of those products that the wealthy should appreciate being up-sold on. An umbrella policy can save them from losing their entire net-worth in the worst-case-scenario.


Is It a Hoax?


Wealthy people may feel annoyed that they are constantly being up-sold on products, such as insurance. They may think, ” I already have homeowners’ insurance, car insurance, health insurance, and life insurance. Why would I would I need more insurance? “


Avoid the Worse-Case Scenario


What is the worst-case scenario? Financially speaking, it could be if a client with a net worth of $1 million were to be sued for $1 million by a wily fox who new they had a large net worth. If the wily fox won the lawsuit, that client would lose their entire net worth over something as simple as rear-ending the wrong person.


Who Can Get an Umbrella Policy?


An umbrella policy is generally only available to those who already have homeowners and car insurance policies. In other words, if you are a renter, you may not be eligible for an umbrella policy.


How Much Coverage Do You Need?


Umbrella plicieis are designed to be an extra layer of protection on top of those basic policies. Have at least enough protection to cover your entire net worth. Don’t let the fox into the hen house.


A common amount to start with is $1 million in coverage, but it is easy to qualify for more, if your net worth justifies it.


Is An Umbrella Policy Worth It?


An umbrella policy is relatively inexpensive, and it could be the best investment your client ever makes. You can think of it as a backup insurance plan. The first line of defense will be the homeowners or car insurance policy. However, if those two don’t cover the damages or the lawsuit, that is when the umbrella policy activates.


What All Will An Umbrella Policy Protect Me From?


The coverage should be broad enough to handle scenarios that you least expect, which may be well beyond the scope of the basic homeowners and car insurance policies. For example, if you get sued for defamation of character, your umbrella policy will be there to help in your time of need. However, for situations like the defamation of character, which are not covered by the underlying homeowners’ policy, the client may need to pay a self-insured retention (SIR), which is comparable to a deductible.


The Wealthy Need an Umbrella Policy


It’s typically not the poor getting sued for defamation of character. It is the rich. This is why the rich need an umbrella policy.


Do you consider yourself wealthy? Most of us don’t. But, most likely you would hate to lose your life savings and your house because of one silly lawsuit or car accident.


Come to think of it, I ought to get a quote on one for myself. I don’t want to take a chance on losing everything I have worked for in a frivolous lawsuit.