A Hole in the Umbrella
Most people driving around these days are blissfully unaware of Umbrella Policies. Umbrella policies or "Personal Liability Umbrella Policies" (PLUP) are insurance policies sold to cover individuals and businesses in case the "regular" insurance is not enough. In other words, if you kill someone by your own negligence, and they sue you for more than your regular insurance policy limit and win, your Umbrella Policy will "kick in" up to its policy limits, which are usually at least one million dollars.
Here is the catch: Most Umbrella policies EXCLUDE coverage for your family members. What that means is that if you are driving the neighbor's kid to school and severely injure her because you ran a red light, your Umbrella policy will provide coverage for her injuries. BUT, if you are driving your wife and your OWN child and ran the red light injuring them both, the Umbrella policy would pay nothing. That's right, NOTHING, nada, zilch. The Umbrella policy contains a provision called a "household exclusion" or "family member exclusion" that prohibits coverage for members of your household.
Agents Unwittingly sell Unfair Policies
Is that unfair? Sure. But insurance companies get away with it because no one reads their policy. On top of that, many agents selling these policies do not even realize the provision is in there. They may not realize it is in the Umbrella because North Carolina outlawed family member exclusions in other types of automobile insurance (liability, underinsured, uninsured) decades ago.
Want to know more about how to "fix" the Umbrella?...read on by clicking below......
I'll gladly sell you less coverage for more money....
The other big problem with the Umbrella family member exclusion is that some Insurance Companies market the Umbrella Policy as a cheap alternative to other insurance. Umbrellas are cheaper by comparison to liability insurance because they are secondary, meaning they pay only after other insurance gets used up. That means there are not too many Umbrella claims and they can sell the policy for less. A one million dollar Umbrella can cost as little as $250 per year.
What happens sometimes is that an insurance company will say to a policy holder, "Hey, you are paying a lot of premiums for that $500,000 in auto liability insurance coverage. You know you could lower your liability insurance limits to $250,000 and then buy a one million dollar Umbrella policy for less money." And that's true, except that if you happen to injure or kill your own family members, now all they can get is $250,000 in coverage, not your previous $500,000. And they can't touch the Umbrella policy.
Things to Do to Protect your Family from a "Leaky" Umbrella
- Read your insurance policy and make sure your agent understands it too
- Look carefully at the exclusions in your policy
- If you lower your liability insurance and buy an Umbrella, keep your under-insured (UIM) and uninsured (UM) coverage at one million dollars to protect your family. Your liability insurance level can be much less if you prefer.
- Complain to your agent that the Umbrella policy exclusion discriminates against families
Too late, we already had the accident and the Umbrella won't cover my family!
All is not lost. There are ways to challenge the "family member" exclusion in a court of law. One way is to ask a Judge to throw out the provision or ignore the provision because it should be against the law to include the exclusion. ANother way is to ask a Judge to "read in" another type of insurance into the policy.
I have extensive experience handling these types of insurance matters, and I am happy to talk to anyone, potential clients or attorneys, about these cases. The law is tricky and delicate in this arena, but there is hope. Hopefully, if we all work together, we can convince North Carolina to officially declare the family member exclusion a thing of the past.