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Covering All Bases

Add an extra layer of liability protection through umbrella insurance.

Life can be unpredictable, and as much as you plan, your insurance policies may no longer cover every aspect of your needs. This is especially true in today’s litigious society where people are filing more lawsuits and receiving larger judgments. For these situations, it is important to have an umbrella insurance policy with the right amount of coverage. For example, a survey of 600 agents by ACE Private Risk Services found that 92 percent of high net worth individuals were likely underinsured on their umbrella liability. “Umbrella coverage can usually offer broader coverage than the underlying policy and, in some cases, can act as the primary liability coverage,” says Craig Hassinger, CEO and president of SeibertKeck Insurance Partners. We spoke with Hassinger about how umbrella coverage can extend your protection.

What is umbrella liability insurance?

Umbrella insurance is an additional insurance policy that covers losses above the limit of underlying policies, such as home and auto insurance, and can be written to cover both commercial and personal risks. For your business, umbrella liability insurance provides an extra layer of coverage for claims that exceed your primary business liability limits. Standard insurance policies will cover your business in most situations, but when serious circumstances occur, umbrella liability helps guarantee that your business is completely protected.

What are the functions and benefits of umbrella liability policies?

Your insurance policies are in place to protect your home and auto or business. When accidents occur or you experience a large loss, the umbrella policy is designed to:

  • Provide additional limits above each occurrence limit of the insured’s primary policies.

  • Take the place of primary insurance when primary aggregate limits are reduced or exhausted.

  • Provide broader coverage for claims not covered by the insured’s primary insurance policies, which would be subject to policy retention.

In addition, an umbrella policy expands the limit of liability insurance above your other polices and also can offer broader coverage than the underlying policies. For example, you could be sued for slander. Your homeowner’s policy may not cover that, but the umbrella may pick it up. Your insurance adviser will work with you to identify and provide umbrella liability coverage to pick up where your basic coverage left off.

How much coverage do you need?

There is no exact answer to the amount of coverage one should have for an umbrella policy, but there are ways to determine possible exposure. For example, you are driving and accidently run a red stop light and create an accident. Unfortunately, one person in the car you hit is killed and the other is injured. An auto accident can easily result in damages of $1 million, especially if someone is injured or killed. You are responsible for the $1 million of damages. If you have an auto liability with a limit of $500,000 that will be used — leaving you with an outstanding balance of $500,000. You are responsible for paying that amount. After exhausting your personal assets, say $400,000, you would still be left with $100,000 of damages, which you could be sued for and have your wages garnished. In the scenario above, if the driver had a $500,000 or $1 million umbrella policy, it would have covered the damages above the auto policy. To determine the amount of umbrella insurance that is right for you, start with your assets, your exposure, and your future earnings, and consider how much risk you are comfortable with and how much risk you want to transfer. Are you willing to take on more risk, or do you want a safer bet by purchasing higher limits? View the decision through the lens of how a lawsuit could affect not only you but also your family. Some people may be risk-takers, but they do not want to risk something that can affect their whole family. No matter the size of your exposure, your insurance agent can help you analyze your risk and provide you with options that fit your needs.


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