The money blunder that can cost doctors everything

By Physician Sense
Published October 28, 2020

Key Takeaways

When said at random, PLUP sounds like a cartoon sound effect. When said by a physician facing litigation, it sounds like a sigh of relief. PLUP, or a personal liability umbrella policy, is an added layer of protection between a financially established physician and a litigious plaintiff. 

Doctors are no strangers to insurance. You or your employer have a malpractice policy, and in addition, you likely have homeowners and/or and auto insurance. Unfortunately, the homeowners and auto insurance may be inadequate protection for a doctor.

Why PLUP is a must

Every insurance policy has limits. The higher the limit, the higher the price of the policy. Let’s say you’re using the same auto insurance policy you purchased when you got your license. A lot has changed since then. You no longer listen to Korn, your bedroom doesn’t smell like Axe, and you aren’t putting melodramatic lyrics in your away message (or using AOL instant messenger, for that matter). Also, you’re probably making more money, which makes you a prime target for a lawsuit.

Here’s a plausible nightmare scenario: You hit somebody with your car and they suffer a catastrophic injury, or worse. Your cut-rate auto insurance is only going to cover you to a point. The policy includes a cap on what the insurer will pay. After you exceed your policy limits, the litigants are coming after you, your money, your property, and maybe your investments.

This is also true of your home. Nightmare scenario two: A contractor suffers a catastrophic injury at your home. It’s the same principle as with auto insurance. The insurer pays up to a contracted limit, and you’re liable for the rest. 

Now, you might be thinking, OK, I’ll just drive carefully, do my best to make my home free from hazards, and only use contractors who are heavily insured. But it isn’t just your actions or mistakes that you need to worry about. 

Think your teenage son is driving carefully when he takes his girlfriend out in your new BMW M2? Think your teenage daughter isn’t taking an occasional look at her phone while she’s on her way to work? What about when you go out of town for a weekend — do you trust your teenage children not to throw a rager where somebody might suffer alcohol poisoning or get a DUI? Think your docile dog is really OK with the six-year-old next door climbing onto her back? In all of these scenarios, as an established physician with some money in the bank, you are likely the liable party.

The Power of PLUP

In all of these nightmare scenarios, PLUP covers you. You can think of it as an added layer of protection that melds with your existing homeowners, auto, or watercraft policy (if you’re into that). The beautiful thing about PLUP — in addition to the fact that it’s relatively affordable compared to other types of insurance — is that it covers not just you, but also members of your family and household. A $1M PLUP policy, according to the Insurance Information Institute, will cost anywhere between $150-300 per year. Bad credit, a poor driving record, or teenagers in your house may increase the price of insurance.

PLUP may also apply in some other difficult scenarios, including libel or slander. Enjoy traveling abroad? PLUP will even cover you internationally, “with the exception of homes and cars you own under other countries’ laws,” according to Investopedia. Note well: While it does cover the injury (or death) of others, it does nothing to protect your property. 

You physicians are science and math types, so let’s put it to you in that manner. We’ll use the first scenario: You caused a major accident. Let’s say it’s a chain-reaction crash involving five cars with many injuries. 

The lawsuit goes to court and you lose. You’re now facing a liability of $2 million. The liability limit on your auto insurance is $1 million, because you have a pretty good policy. But since you don’t have PLUP, you’re now on the hook for $1 million. Yikes! With a $1 million PLUP policy, your auto insurance would cover the first million, and PLUP would take care of the rest.

How much PLUP do you need? 

This is where it gets tricky, so we turned to an expert. Lawrence Keller of Physician Financial Services suggests obtaining at least $1 million and up to the maximum allowed by your insurer. If you’re looking to strike a balance, get enough to cover your total amount in assets, plus $500,000 to cover legal defense. So, if you’re worth $1 million, aim for $1.5 million in PLUP.

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