A Personal Umbrella Policy is Essential to Protect Your Assets

For high-net worth individuals, the financial consequences of being sued can be serious business. They typically have more assets at risk should they be hit with a large court settlement or judgment. While compensatory damages may be standard across the board, some juries punish the rich especially hard for their negligence. But if you don’t think it can happen to you, consider these scenarios:

• You host a charity function at your home and when 65 guests are on your deck, it collapses, injuring many.
• One of your children is involved in cyber-bullying a child and his parents sue your child for inflicting emotional harm.
• You are at fault in an auto accident that kills two passengers in the other car and severely injures the driver.

While your underlying automobile or homeowner’s policy would pay for many of these damages, the policies usually cap liability payouts at a certain amount – typically $500,000. Any damages above would come out of your pocket unless you have an umbrella policy, which will kick in after your primary insurance limits are breached. The problem for high-net-worth individuals is that a typical umbrella policy is often capped at $5 million. That amount may not be enough if a large judgment is leveled against you. Your assets could be at risk in the event of an especially large judgment. Fortunately, there is a select group of companies that offer specialized personal umbrella policies that have limits as high as $100 million – and they can be customized specifically to your situation.

Why you need it

• High-net-worth individuals often have more liability risks as they are more apt to:
• Hold a charity function or other event at home
• Serve on boards of directors
• Have swimming pools, trampolines and personal watercraft
• Employ residential staff like maids, nannies, drivers and gardeners.

How the policy works

The policy begins to pay when you’ve exhausted the limits of the primary auto or homeowner’s policy. There are two main types of liability that the policy will cover:

• Physical injury to someone and personal injuries (such those sustained from slander or defamation).
• Property damage to a third party that was caused by the insured.