Understanding Your Auto Insurance Coverage Part 4: Personal Liability Umbrella Policy

This week, in our continuing conversation about auto insurance coverage, I will discuss the benefits of a personal liability umbrella policy ("PLUP"). A PLUP is the Cadillac of insurance coverage. If you have significant personal assets to protect, you should have a PLUP in addition to an auto policy.

Unlike liability, uninsured motorist, and Med Pay coverage, a PLUP is a purely optional coverage. A PLUP provides a second layer of liability coverage (and sometimes uninsured/underinsured motorist protection) on a policyholder's auto insurance coverage. For example, if you carry $100,000 of liability coverage and accidentally strike and seriously injure a pedestrian, it is likely that the pedestrian's medical bills will exceed your liability coverage of $100,000.

If the injured pedestrian takes you to trial and is awarded more than $100,000 by the jury, your only options to satisfy the judgment is to sell off your personal assets or declare bankruptcy. On the other hand, if you were wise enough to purchase an umbrella policy before the accident, your PLUP will step up and pay any judgment that exceeds your basic liability coverage up to the limits of the PLUP policy you purchased.

This article will detail the advantages of purchasing a PLUP and discuss the difficulty in discovering when a defendant might have a PLUP available to compensate a person that he or she has injured.

A) ADVANTAGES OF PURCHASING A PLUP:
First, there are really no disadvantages to purchasing a PLUP in addition to your auto insurance coverage. In fact, everyone should consider purchasing a PLUP. The conventional advantages of purchasing a PLUP include:

1) If you purchase a PLUP, you get plenty of bang for your buck. A PLUP is cheap and provides a massive amount of insurance coverage. A basic PLUP provides a million dollars of liability coverage for just a couple of hundred dollars per year.

2) A PLUP covers policyholders AND resident relatives. That means that your PLUP covers family members living in your household in the event they cause a car accident.

3) A PLUP provides broader coverage than your auto liability insurance. These policies will nearly always cover you for any boneheaded thing you might do in a car, a bar, or traveling afar. Yes, I meant for that to rhyme.

4) Some, but not all, PLUPs will come with added uninsured/under-insured motorist coverage. While this type of coverage under a PLUP is becoming rarer, this type of PLUP will allow you to collect from your umbrella coverage if you are injured by someone who lacks sufficient coverage to fully compensate you. State Farm recently stopped offering this sort of PLUP. Nevertheless, PLUPs that offer UM/UIM coverage are still out there and you can call and get more information from your insurance agent if you want more details.

B) FINDING EXISTING PLUPs:
Obviously, it is affordable and prudent to protect your personal assets by purchasing a PLUP. Nevertheless, if you are injured by a negligent driver, the most important job for your injury lawyer is to find out if that negligent driver had a PLUP or any other insurance policies that can compensate you. Failing to discover an applicable PLUP can severely reduce the value of your personal injury case. Many lawyers that dabble in personal injury never uncover this valuable coverage.

The result is that if your case has a high value, you could end up resolving your case for much less than you should, because your lawyer assumed there was only a small amount of auto insurance coverage available. Clearly, if your attorney does not ask the insurance company about any applicable PLUPs, it is safe to assume that the insurance company will not disclose these policies. So, as a practice tip, I always demand that the insurance company investigate and determine whether the at-fault driver carries any sort of umbrella coverage. This is especially important if we become aware that the at-fault driver has significant personal assets to protect.

Because a PLUP is not a required coverage and are more rarely sold to policyholders, they are often not disclosed by insurance adjusters to injured victims and their attorneys. This could simply be an innocent omission or an intentional misrepresentation to save the insurance company from having to pay out more money on a claim.

CONCLUSION:
It is important for you to understand the options available to you when purchasing an auto insurance policy so that you can protect your assets and your family in case you injure another driver. Everyone should consider purchasing a PLUP because it is affordable and provides a second layer of coverage. If you are injured by a negligent driver, call Anderson Hemmat When you are seriously injured and the auto coverage appears to be insufficient, our personal injury attorneys will work hard to make sure you don't miss any PLUP's that may be available to you.

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