What is a Personal Umbrella Liability Policy?
This is an insurance contract designed to accomplish two goals. First, it increases liability protection beyond what you have in your standard homeowners, automobile and watercraft insurance policies. Second, it eliminates gaps in your liability coverage since some things are simply not covered by your automobile and homeowners policies – as an example, libel and slander. The umbrella is designed to pick up where your primary policy stops by providing legal defense and payment of a judgment that goes against you, if the judgment exceeds the liability limits of your primary policies. Together with your homeowners, auto, and watercraft policies, a personal umbrella policy gives you the highest level of protection.
What elements of coverage are afforded under a Personal Umbrella Liability policy?
Coverage is provided in four general categories:
- Personal Injury – Includes coverage for false arrest, mental anguish, wrongful entry/eviction, malicious prosecution, libel, slander, defamation of character, invasion of privacy or negligent infliction of emotional distress.
- Bodily Injury – Includes death or physical injury – in some jurisdictions, this could include emotional injury.
- Property Damage: Includes destruction of property of others, cost of recreation and loss of use.
- Defense Coverage: Includes groundless, false and fraudulent suits, loss of earnings, bail bond costs and other reasonable expenses.
Why do I need an umbrella policy?
An umbrella policy is intended to protect the assets you have accumulated over the years. In fact, this is the type of policy you hope you never use because it is only called upon after a very serious incident has occurred, and is likely to exhaust the coverage afforded under your primary policies. Serious judgments can also be levied against future income, so this policy can protect families just accumulating wealth.
What type of person needs to purchase Umbrella Liability insurance?
Anyone who is exposed to an unusually high risk for a catastrophic liability loss should consider purchasing this coverage. Several RISK FACTORS include:
- Those whose total assets are greater than the underlying liability limits.
- Those who live in a high profile neighborhood or have a high profile career (Senior Executives, Entertainers, Sports Figures, Business Owners).
- Individuals that earn a high income, have accumulated considerable assets, or expect a large inheritance.
- Employ Domestic help and/or occasional workers.
- Those who frequently host guests.
- Own a swimming pool, spa or hot tub.
- People that own watercraft, personal watercraft (Jet Skis), aircraft or expensive automobiles.
- Own a vacation home or rental properties.
- Those who are financially responsible for the actions of a young, inexperienced driver.
- Those who transport others, particularly children.
- Those who perform extensive volunteer work for a non-profit organization.
- Those who engage in extensive international travel for pleasure.
- Families with multiple homes or rental properties.
- Own firearms
Who is covered by this umbrella policy?
You, your spouse (if resident in the household), children, a relative who lives in your household, any person using your auto or watercraft with your permission and any person who has custody of your animals.
Where am I covered by an umbrella policy?
The policy covers you anywhere in the world. However, the suit or civil proceedings must be filed in the United States.
How do I know if I have the required limits under my primary Homeowners, Auto and Watercraft insurance policies?
The Declarations Page on each of those policies will indicate what your maximum limits are. If you have any questions, the staff at Exceptional Risk Advisors, LLC can assist you. In the unusual event that your underlying coverage is insufficient, you can request that your coverage be increased to conform to the required minimums (usually the additional premium required to make any necessary adjustment is nominal).
If I currently have an umbrella policy, and I want to change to this program, what should I do?
You should enroll in this program, and notify your current carrier to cancel your coverage as of the effective date of your coverage under this plan. Typically, you will be entitled to a proportional return in unearned premium.
If I currently have an umbrella policy, can I purchase this program for “extra coverage” and leave the existing umbrella coverage in place?
Typically, you are better off buying coverage under one single policy to maximize your pricing leverage, and minimize any confusion in the event of a large claim. From time to time, we counsel select clients to maintain a $1,000,000 umbrella policy with their existing carrier. The reasons for this vary, but some carriers offer a credit on the Home Owners coverage by maintaining an “additional product line”. If you would like us to review your existing insurance portfolio, we will do so at no cost or obligation.
Does my coverage automatically renew at the end of the policy term?
No, your coverage needs to be renewed every year. Rates and terms are subject to change from year to year.
If my employment status, or relationship with the plan sponsor changes, does my coverage terminate?
No, your coverage will stay in place until the policy period expires. Following that period, you will need to seek coverage from another insurance company.
What are some “real life” claims examples?
- While performing maintenance work, a domestic employee fell from a roof and sustained fatal injuries.
- Excessive weight and improper design caused a deck to collapse during a party, injuring numerous guests.
- A large dead tree branch fell onto a neighbor’s greenhouse, causing extensive damage.
- As a result of remodeling a penthouse balcony, rainwater entered the building, damaging neighboring units.
- A dog bit a child in the face causing permanent nerve damage.
- An insured ended a relationship with a domestic partner and forced the partner to move out of the home. The partner sued, alleging wrongful eviction.
- A 9 year old guest at your son’s pool party unknowingly dives into the shallow end of your pool and suffers devastating paralysis and injuries amounting to millions.
How much Coverage do I need?
While many Financial Advisors recommend that your umbrella policy be equivalent to your net worth, they neglect to consider risk factors that may leave you exposed. All of your assets are at risk – even your home and future earnings. Affluent individuals and families that have numerous RISK FACTORS (highlighted above) should consider a minimum of $5,000,000. Those with more than 5 Risk Factors should consider $10,000,000 umbrella or higher – even if this exceeds your net worth.
Can Exceptional Risk Advisors assist with the rest of our Insurance Portfolio?
Yes, Exceptional Risk Advisors, LLC and its principals are licensed in most states. We are exclusively focused on providing solutions for Property and Liability risks of the affluent. We do not offer Life insurance or related products, nor do we invest money or provide tax advice.
Exceptional Risk Advisors is a market leader in managing the personal insurance needs of affluent and high-net-worth individuals and families. Those with substantial assets require a Personal Risk Management approach for protecting their homes, automobiles, yachts, aircraft, fine art, jewelry and collectibles. We put our clients first, and select our carrier partners on a strict criteria, that takes
financial ratings, service, expertise and claims handling into consideration. All of our carriers understand the unique needs of insuring affluent clients, and their associated property and liability exposures. This being said, we firmly believe that choosing the right insurance broker is often as important as choosing your insurance carrier.
Helpful links to better understand unmbrella liability insurance:
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