As the old adage goes, “You do not have to be a millionaire to be
sued like one.” The fact is - a single lawsuit, even if you win, can
end up costing hundreds of thousands of dollars. In today's society,
more people file lawsuits for more money than ever before. The
personal liability coverage available through a homeowners or
automobile policy is simply not enough to protect you. An umbrella
policy can offer a higher level of liability coverage that protects
you and your family from damages for which you may be held
responsible.
The greater your assets, the more you potentially have at risk.
Umbrella coverage can help protect you against personal liabilities
that could attack a substantial portion of your current assets, future
assets or future earnings.
A personal umbrella liability policy is an insurance contract designed
to increase the liability protection over and above a standard home
and/or auto insurance policy. The personal umbrella extends your
liability protection beyond the primary policy limits - usually sold
in million dollar increments. An umbrella may be obtained once your
home and auto insurance policies meet a minimum “attachment point”
(typically, a liability limit of $250,000 or $500,000).
Personal umbrella policies provide four
elements of coverage:
- Personal
injury: Includes mental anguish, false arrest, wrongful
entry/eviction, malicious prosecution, libel, slander, defamation
of character, invasion of privacy or negligent infliction of
emotional distress
- Bodily
injury: Includes physical injury or death - in some
jurisdictions, this includes emotional injury
- Property
damage: Includes destruction of the property of others,
cost of recreation, and loss of use. Worth noting – an umbrella
policy does not provide coverage for your own property (such as
not having sufficient limits to cover a homeowner’s loss)
- Defense
coverage: Includes groundless, false, and fraudulent suits,
loss of earnings, bail bond costs and other reasonable expenses
A handful of specialty insurance companies (notably; Chubb,
Fireman’s Fund and AIG Private Client Group) offer unique or
expanded options, such as:
- Personal
injury: Enhanced coverage for individuals in the public eye
– libel and slander coverage is often excluded by most standard
insurance companies.
- Not-for-profit
directors and officers coverage: Coverage if you are sued
for personal injury or property damage resulting from your
volunteer service on the board of a not-for-profit organization
and/or homeowners association.
- Uninsured/Underinsured
motorist protection: Provides higher limits for
uninsured/underinsured coverage and/or property damage from an
uninsured driver.
- Employment-Related
Lawsuits: It is not uncommon for domestic staff such as
nannies, housekeepers, private assistants, gardeners and other
domestic staff to take their employers to court citing claims of
wrongful termination, sexual harassment and discrimination.
- High
Limits: Most insurance companies provide a maximum limit of
$3 - $5 million. Several carriers regularly offer coverage from $5
million - $10 million. Chubb and AIG Private Client Group are the
only two carriers with capacity to provide coverage up to $100
million. These two companies are backed by the highest ratings for
financial strength and claims paying ability. Only Chubb and AIG
Private Client Group offer such high limits in one convenient
policy.
- Unlimited
Defense Costs: Most companies limit the amount of money
associated with the cost to defend a lawsuit. With Chubb, AIG
Private Client Group and Fireman’s Fund the defense costs are
unlimited – even if the cost exceeds the stated policy limit.
Real life scenarios
- You drive down a busy street and
accidentally injure a successful entrepreneur in the crosswalk.
Medical costs, lost earnings and damages amount to millions.
- A 15-year-old guest at your son's
pool party dives unknowingly into the shallow end of your pool,
and suffers devastating paralysis and injuries amounting to
millions.
- Your tenant sues you for wrongful
eviction, unlawful entry and slander. The cost to defend may be in
excess of $100,000.
- You're having a wide-screen
television delivered to your home, a deliverymen slips on your wet
steps and fractures his skull. Damages are several hundred
thousand dollars.
- While carrying your umbrella in the
rain, you accidentally poke the eye of an executive. The executive
loses her eye and the injury causes significant disfigurement.
Medical costs, lost earnings and damages amount to millions.
While many financial advisors recommend that your umbrella policy be
equivalent to your net worth, they neglect to consider risk factors
that could leave you exposed. A judgment against you may exceed your
entire savings. All of your assets are at risk - even your home and
future earnings. We recommend that clients review risk factors as a
measurement of probability. Affluent individuals and families that
have five or more factors should consider an umbrella policy of, at
least, $5 million. Those with six or more may need a $10 million
umbrella or higher.
Risk Factors:
- Earn a high income, anticipate a significant inheritance, have a
net-worth over $250,000
- Own an expensive automobile – accident victims tend to have
complicated injuries and are less compassionate when hit by a
luxury automobile
- Own a swimming pool, hot tub or spas
- An individual in the public eye - a CEO, senior executive,
notable shareholder, government official, celebrity, or sports
figure
- Own rental property (wrongful eviction, unlawful entry, slander,
malicious prosecution may be included in umbrella policies)
- Dog owners, especially a breed with a high occurrence of attack
or biting (however, even a Pomeranian has killed two over the past
twenty years – source CDC Dog Study)
- Transport others, particularly children or the elderly
- Have teenagers
- Own a motorboat, sailboat, personal watercraft or snowmobile
- Serve on a homeowners association board or a nonprofit board of
directors
- Own a vacation home
- Own property on a steep hillside – damage caused by landslides
to the property of others is covered under personal liability
(however, damage to your property is excluded)
- Own firearms
- Employ domestic help and/or occasional workers
The price of an umbrella policy depends on three main rating factors
– the dollar limit of coverage, the number of properties
owned/rented and the number of automobiles/watercraft owned. The cost
associated with automobiles and watercrafts are much higher than the
cost for each property location.
For example, the premium for a $5 million umbrella for an
individual with one home and one auto ranges from $270 to $550 per
year. The cost of a $10 million umbrella for a family with two homes,
one rental property and three autos ranges from $1,250 to $1,850.
Consider Increasing or Adding Umbrella
Coverage
Umbrella coverage can help protect you against personal liabilities
that could attack a substantial portion of your assets or future
earnings. For a few hundred dollars, you may add an umbrella policy or
increase your policy limits commensurate to your growing assets and
“risk factors.” Talk to your personal insurance agent regarding
this important coverage.
About Fort Point Insurance
Fort Point Insurance Services, Inc. is an independent agency
specializing in the design, placement and servicing of innovative
personal insurance programs for affluent individuals and families. We
accomplish this by drawing on our relationships with the nation's most
respected insurance carriers, and from our own experience in serving
the private client personal insurance market. Based in San Francisco,
we work with individuals and families across the United States.
Fort Point’s commitment is to build long-term relationships based
on trust and confidentiality, distinguished by strength and diligence.
They accomplish this by drawing on their relationships with the
nation's most respected insurance carriers, and from their own
experience in serving the affluent personal insurance market.
Working closely with your Equity Risk representative, Fort Point
analyzes coverage gaps, identifies potential loss exposures and
recommends proper limits of liability to protect both your property
and financial assets. At Fort Point Insurance, insurance professionals
are prepared to offer you unparalleled service and more sophisticated
coverage as they manage your personal insurance program.
