If you visit your property/casualty agent on any regular basis, you may have been contacted several times about your need for a PLUP. What is a PLUP you ask? It is an acronym for Personal Liability Umbrella Policy. You may be thinking: “Why do I need an insurance policy to cover the damage I can cause with my umbrella? That seems strange…”
Although unintentional damage you cause with a personal umbrella would be covered under an Umbrella Policy, that is not the meaning of the term. An umbrella policy was coined because of the way it protects everything underneath. In this case, you are protecting your assets from an excessive claim for which you could be personally liable. Here’s an example:
You decide to have a small barbecue gathering to celebrate the beginning of summer. You’ve wanted to make some repairs to your deck, but nothing major. Some friends come and some acquaintances you don’t know very well. While you’re grilling on your back, one of the acquaintances trips over the deck railing. He gives in and falls two stories to the courtyard below. Seriously injured, you call 911 and an ambulance arrives to treat him. You later find out that he has severe trauma to his neck and head and will never recover. His family is suing him for medical bills and personal injuries. Yes, he has homeowners insurance with some liability coverage, but the medical bills and personal injuries they are seeking are hundreds of thousands of dollars beyond that.
What do you do for a living?
Typically, you find the best lawyers you can and try to settle out of court, hoping you don’t lose everything you own to pay the family or legal fees. It’s a nightmare scenario that most people believe will never happen to them. Unfortunately, this is just one of many types of situations where a simple mistake, a bit of negligence, or even an action by your minor children could end up costing you your entire life savings and more.
A general personal liability policy is an inexpensive way to get a higher degree of protection for your assets, costing around $250 a year for $1 million of coverage. They are typically issued with a minimum of $1 million of protection, and your policy limits can be much higher if you choose. The insurance company will require you to have higher underlying limits of liability protection on your home/auto policies, but this is usually a good idea anyway.
If a major liability claim arises, the insurance company provides attorneys and works on your (and their) behalf to provide the best possible defense. Of course, each company is different and you should do a thorough investigation of your particular situation and the details of the policy before you decide to buy anything.
Given the sue-happy culture we live in, a PLUP can be a profitable risk management tool that protects your savings from a simple mistake. We often talk to our clients about adding a PLUP to their insurance portfolio, and we wanted to convey that message to you.