Personal Umbrella Policy Overview

Personal Umbrella Policy

• Protects against catastrophic personal lawsuits ($1-$10 million limits)
• Covers excess liability beyond homeowners and auto policies
• Provides broader coverage than standard policies
• Minimum underlying limits are required from home and auto policies
• Premiums range from $200-$250 annually per $1 million limit

Umbrella Insuring Agreement

• Pays damages exceeding the retained limit for BI, PD, or PI
• Legal defense is included in the policy limits

Retained Limits Under Umbrella

• Policy specifies umbrella retained limits (HO or PAP)
• Retained limits are stated in the declarations, often $1,000
• Issues arise when underlying policy limits are lower than required minimums

Underlying Coverage Limits for Personal Umbrella Policy

• Auto limits: $250,000/500,000/50,000
• Homeowners' liability: $300,000
• Watercraft liability: $500,000

Example of Underlying Policy Limits

• Dan and Lori have a $1 million umbrella policy with $250,000/500,000/100,000 auto limits.
• A $300,000 umbrella loss occurs with lower underlying auto policy limits ($100,000/300,000/100,000 at the time of the loss)
• Dan and Lori would pay $150,000 out of pocket before the umbrella coverage responds.

Umbrella Provides Broader Coverage

• Covers personal injury (false arrest, libel, slander)
• Covers non-owned watercraft
• Covers worldwide automobile (not owned or rented)
• Excludes intentional injury, business liability, communicable disease, professional services (doctor, lawyer), and directors' and officers' liability

Umbrella Claims Examples

• Insured is at fault in an auto accident involving school bus passengers.
• Insured slanders a public official.
• Auto accident while driving in Europe.
• Jet ski accident with serious injury.
• Intoxicated driver crosses median and crashes.

Health Insurance

• Deductible: Amount paid for covered services before insurance starts to pay. Higher deductible = lower premiums, often per individual or family annually. Preventative care checkups can be waived for some plans. Separate prescription limits may exist.
• Coinsurance: Percentage paid for covered services after the deductible has been met. Common percentages are 20% or 30%.
• Copay: Flat fee for doctor's visits and prescription drugs. Discourages overuse.
• Annual Stop Loss: Maximum out-of-pocket limit, once this threshold is met the company pays 100% of medical expenses for the year.

Health Insurance - Policy Types

• POS (Point of Service): Allows utilization of both in-network and out-of-network providers. Higher costs for out-of-network. Specialist referrals usually required for out-of-network specialists.
• HMO (Health Maintenance Organization): Allows utilization of only in-network providers. Premiums are generally lower. Specialist referrals usually required for specialists.
• Preferred provider organization (PPO): Allows both in-network and out-of-network providers, but out-of-network coverage is typically lower and a referral is not required to see specialists.

Health Savings Account (HSA)

• A personal account for qualified medical expenses.
• Eligibility: High-deductible health plan (HDHP), not covered by Medicare. Balance may accumulate if not used in the previous year.

Health Care Reform (ACA)

• Effective in 2010, governs health insurance.
• Key provisions: dependents covered until age 26, no lifetime limits, coverage regardless of pre-existing conditions, prevent cancellation due to illness.
• Health Care Exchange: A place for individuals and families to purchase plans. Premiums can be subsidized to 50% of costs up to $47,250 and $97,200 for families.

Retirement Planning

• Need for Comprehensive Retirement Program: Budgeting, savings, and investing. Key resources to have are health care power of attorney, general power of attorney, and living wills.
• Retirement Income Objective: Examples provided for salary, annual growth rate, and desired retirement income.
• Retirement Funding Options: Employer-sponsored retirement plans, tax-exempt Roth IRAs, and personal investment accounts.
• Savings & Investing: Types of savings vehicles like CDs, money market accounts, emergency funds, and investments. Stocks and bonds. Risk tolerance is also a consideration. Portfolio diversification is important.

Investments - Tax Strategy

• Tax deferral from employer-sponsored 401K, IRAs, or annuities.
• Tax-free income sources like Roth IRAs, health savings accounts (HSAs), and municipal bonds.

Revocable Living Trust (RLT)

• Estate planning tool for managing assets during lifetime and at death.
• The grantor retains control during lifetime and designates a successor trustee.
• Avoids probate fees and protects assets from claims.
• Includes life insurance, cash, stocks, bonds, and other personal assets.