Do you have enough personal liability coverage?
While significant financial judgments in personal lawsuits are not awarded on a daily basis, there is no time like the present to realize that one could happen to you. Being on the wrong end of a large financial judgment could cause severe harm to your family’s wealth and lifestyle, especially if you lack the appropriate level of personal liability coverage.
The solution, however, is rather simple, and, compared to other lines of insurance coverage, relatively inexpensive: An insurance advisor can review your current coverage terms and recommend strategies based upon your individual and family needs, which will provide best-in-class protection.
You may already know that the liability coverage from your home or automobile insurance policies, and your personal excess or umbrella liability insurance policies may respond to the following events:
- You are at fault in an auto accident, and the other driver has severe injuries.
- Someone visits and while leaving slips on your icy driveway, breaking both wrists.
- Your dog bites a visiting neighbor. But depending on policy form type and endorsements added, did you know that your personal liability coverage could also respond to the following instances as well?
- Your condo or cooperative apartment has a water leak that also damages 28 apartment units below yours in the same building.
- You are golfing with friends and a tee shot goes awry, badly injuring one of your friends.
- The nonprofit board that you sit on is sued by a former employee for wrongful termination, and all of the directors, including you, are named in the lawsuit.
How Much Coverage Do You Need?
The most common benchmark is to match the personal excess liability limit you purchase with your personal net worth. However, an insurance advisor will want to know more about you, and your lifestyle specifically, before determining the best coverage limit fit.
Are you a high-profile individual? Do you host large gatherings in your home? Are you active in local sports leagues? Do you sit on nonprofit boards? Do you run your business or a part-time business out of your home? Do you have domestic employees? These are just a few individual variables that can impact our own firm’s coverage limit recommendation and determine whether you should consider various endorsements that can be added to your personal excess liability policy. Finally, and most importantly, while the following statistic is not normally advertised to the public, it is rare that a personal lawsuit judgment will exceed $25 million; consequently, this could be a factor in your coverage decision.
Not watching for gaps in your personal liability coverage could cost you hundreds of thousands of dollars in the event of a claim.
Not All Personal Excess Liability and Personal Umbrella Policies Are the Same.
For affluent families, it is critically important to understand that personal excess and personal umbrella policy forms can be vastly different in important claim scenarios.
It is imperative that your agent and insurance advisor read and understand any policy form in question. For example, some policies will cover directors and officers sitting on nonprofit boards, while other policies will endorse the coverage on to the policy for an additional premium; alternatively, many policies will not provide this coverage at all.
Mind the Gaps.
While you should always watch for gaps when stepping onto the New York City subway, not watching for gaps in your personal liability coverage could literally cost you hundreds of thousands of dollars in the event of a claim. All personal excess and umbrella liability policies have “minimum underlying coverage requirements” for home, apartment, automobile, motorcycle and watercraft policies.
If your policy does not meet the relevant underlying requirement, you personally will be responsible for the gap between the underlying policy and the excess liability policy. This could range from $100,000 to over $300,000. Consequently, a holistic approach that reviews all of your property and casualty policies is strongly recommended.
This essay provides only a very topical summary of the personal excess and umbrella liability climate, which will hopefully spur you to take the time to have a competent insurance professional review your personal risk portfolio.
There are many small details within the personal liability policy forms, and just one little detail not addressed could lead to catastrophic financial crisis for you and your family.
The Cook Maran Private Client Team is available at your convenience to provide a comprehensive, no-obligation, no-cost review of your risk portfolio.