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How important is adequate personal excess liability insurance coverage?

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In today’s litigious society, multimillion dollar judgments have become increasingly common, and obtaining the proper amount of liability protection is essential to wealth preservation. Legal proceedings, settlements and judgments for uncovered personal liability exposures can be devastating. The liability limits on homeowners, automobile, watercraft and other personal insurance policies may not be enough to cover real-life jury awards.

But, when a judgment from a lawsuit exceeds the coverage limit on your underlying policies, a personal excess liability policy can protect both your current and future assets. Individuals and families with substantial wealth are often a greater target for such lawsuits and may often have significant gaps in their overall insurance portfolio.

Excess liability coverage can range from $1 million to $100 million and may even “drop down” to cover exposures not covered by the underlying policy. An example would be coverage for defamation of character, libel, slander and false arrest—perils that may be excluded from some homeowners policies. Umbrellas offer protection for individuals who potentially face lawsuits or other legal liability claims, and cover legal costs and court fees, lost wages and interest accrued on unpaid judgments.

Many high net worth individuals and families are unaware of their lack of appropriate coverage because they are insured by mass-market carriers.

Other personal liability options include uninsured/underinsured motorist (UM) coverage, employment practices liability and nonprofit directors & officers liability. UM can provide medical expenses, lost wages and pain and suffering for insured citizens who have been injured by another vehicle operator who did not carry adequate bodily injury liability coverage. Employment practices liability insurance (EPLI) can protect the insured from legal action, from a domestic employee who sues for wrongful termination, sexual harassment, false imprisonment or invasion of privacy.

Directors and officers (D&O) coverage can provide additional limits on top of the limits already carried by the nonprofit organization for the board member. These coverages may be purchased by endorsement and often provide legal defense costs in addition to the policy limits.

Many high net worth individuals and families are unaware of their lack of appropriate coverage because they are insured by standard mass-market insurance carriers that do not cater to the unique needs of affluent clientele.

This may be because their insurance advisors do not have access to—or simply do not know about—this type of protection. It is imperative to identify and understand potential personal asset exposures beyond traditional insurance programs. Your insurance advisor should have direct access to all of the carriers that specialize in protecting affluent families and individuals.

He or she should be able to offer you a detailed evaluation of your existing coverage and policies, with specific emphasis on adequacy of limits and potential gaps in your protection. Your advisor should also regularly review your insurance portfolio and make recommendations, as your liability coverage needs may change over time.

Risk & Insurance

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