Private wealth clients have complex insurance needs and one of the policies we most recommend is umbrella coverage. This excess liability coverage protects your assets in a variety of scenarios. If you have an umbrella policy in place, it’s critical that it meets your current needs – you may have outgrown it if you’ve had the same coverage for years, but your wealth has grown. You should be familiar with how your umbrella coverage protects you and what it doesn’t cover.
Your umbrella policy protects you from third party lawsuits, even when the claim is frivolous. The intent of the policy is to protect you from lawsuits arising out of bodily injury, property damage, and some carriers also offer personal injury protection. The umbrella policy only covers lawsuits that are personal in nature – anything commercial (i.e. related to your business) is not covered. Every carrier will differ on the specifics of what an umbrella policy will cover and some coverage is available only with a specific endorsement.
Here’s a look at what’s typically covered and what must be negotiated:
Defense Costs – The cost to defend yourself against the lawsuit may be part of your liability limit. It’s important to know if that’s the case because it will lower the amount of coverage available for damages. Lawyer fees are part of that cost. For instance, if you have a $5 million umbrella policy and your defense costs $1 million, there would be $4 million left to cover damages. If damages exceed $4 million, you would be out of pocket. Understanding the specifics of the coverage language is important.
Excess Uninsured and Underinsured Motorist – A handful of carriers offer this and it extends the uninsured/underinsured coverage on an auto policy. If someone causes bodily injury and they are uninsured or underinsured, the umbrella would pick up where the other policy leaves off. This protection covers you, your family members, or any passengers in your car. It also covers you if you are struck by an uninsured motorist while driving, bicycling, or jogging – the coverage extends to anywhere in the world if you are injured by someone with no auto insurance or insufficient coverage.
Employment Practices Liability Insurance – This is available with a special endorsement and is not standard coverage. The coverage protects you from employment-related lawsuits such as wrongful termination or harassment. This is a big exposure area, is commonly litigated, and must be specifically added to your umbrella coverage.
Shadow Coverage – This is coverage that allows your personal attorney to shadow the claims adjuster or insurance attorney. This can give you peace of mind and another voice in the room during a proceeding.
Kidnap and Ransom – This is another coverage that can be added by endorsement to your umbrella policy. Depending on your family circumstances, where you travel, the nature of your business, and other concerns, you may have exposure here. This is something to discuss with your insurance advisor.
Identity Fraud – As the risk of identity theft and fraud grows, more carriers are offering this coverage. With this coverage, a third party firm communicates on your behalf to take care of restoring your identity and also reimbursing you for out-of-pocket costs and time lost restoring your credit.
Personal Injury – Libel and slander are a growing area of third party lawsuits for wealthy individuals and many carriers don’t offer the coverage. This is becoming more common with social media activities, as people may file lawsuits over a negative tweet or Facebook post. This policy may be important if you or your family are active on social media.
Umbrella coverage can vary widely from carrier to carrier and your risk and coverage needs will shift as your wealth portfolio evolves. Assessing what you need to protect, what are the right policy limits, and what is the best carrier and policy to meet your needs are all part of the coverage conversation to have with your insurance broker and wealth advisor. You want a specialized carrier that has a focus on insuring affluent clients and understands your unique risk exposure and needs.
To discuss your umbrella policy coverage and how The ABD Team can assess your risk and help protect your assets, contact us and let’s talk.