One of the biggest gaps in Americans’ personal financial planning is the lack of umbrella insurance. Designed to cover any liability costs that exceed the limits on traditional home, auto and watercraft insurance, personal umbrella policies are typically inexpensive (for the value of coverage).

Yet many – if not most – individuals are not covered by an umbrella policy. What are they risking by omitting this simple aspect of their insurance protection?

Without a Personal Umbrella Policy, They Could Lose Everything

Without an umbrella policy to cover any excess at-fault liability costs, your client could be saddled with potentially catastrophic financial losses. Especially when you consider that motor vehicle liability awards in 2009 jumped almost 40 percent to an average of $48,480 and wrongful death claims averaged $2,185,000 (according to the National Law Journal).

While standard home and auto liability policies cover between $100,000 and $300,000, umbrella policies can cover up to $100 million under a single carrier. A good rule of thumb is to advise clients to take on one-to-two times their (vulnerable) net worth, while taking into consideration the client’s lifestyle-related risks and visible wealth.

Liability Risks are Everywhere

This is not “special occasion” insurance – it’s crucial for everyday risks. More than 80% of umbrella losses are auto-related.

It’s easily possible to imagine the following scenarios (and many others):

  • A teenage son on his parents’ auto policy loses control and slams into another vehicle, injuring the driver.
  • Another driver falls asleep at the wheel and veers into your lane, forcing you to swerve to avoid a collision. The swerve throws you off-balance, and launches your car over the curb and into a glass-front retail structure, destroying merchandise and injuring an employee.
  • A contractor working on a kitchen renovation trips over a pile of scrap wood, and lacking sufficient personal coverage to pay his resulting medical costs, sues the homeowner.

If the policyholder is found to be at-fault, standard liability insurance will be used up quickly. Where will the excess funds come from to pay for the injured’s medical bills, repair costs, and legal fees?

Personal Umbrella Policies are Relatively Inexpensive

A typical homeowner with two cars can get a $1 million policy for $250 to $400 a year, according to the Insurance Information Institute.

While it’s an important consideration for everyone, high net individuals especially should hold umbrella policies – and update them frequently. As wealth grows, the sophistication and coverage of the umbrella policy must keep pace to assure adequate coverage.

What specific factors should agents consider when selecting an umbrella policy for their clients? What level of coverage is adequate? Atlantic Specialty Lines’ deep expertise in the high-net customer base means we can account for every possible risk in our umbrella offerings. For more personalized information, please give us a call today at any of our Atlantic Specialty Lines offices: Virginia-(800) 368-2095, Florida- (877) 545-9100, Midwest- (800) 388-4375, Pennsylvania- (800) 388-4375 or Texas (800) 284-6858.


Image courtesy of smarnad /