Friday, March 4, 2011

Have an "Umbrella" to protect you from the liability rain!

What amount of money will you be required to pay out when you are found negligent? There is no easy answer to this question, and whether for your business or your personal needs, you should have Umbrella or Excess liability coverage in addition to your standard liability policies to prepare for this possibility.

We all know that the today we live in is very litigious. Everyday we can read, hear or see a story about how someone recently won a verdict in which the defendant would be required to pay for their mistake. Often that is what it was too, a horrible, tragic mistake. Some unintentional defect in manufacture, a tool left where it shouldn't be, eye averted checking that last text while driving. We are all guilty of some type of brief lapse in judgment or sheer bad luck. Very often we catch the mistake before something bad happens, but unfortunately the odds catch up with us at the worst possible time.

When that storm happens, that is when you want to know you have an Umbrella or Excess liability insurance policy. These are in fact 2 kinds of coverage, with some of the same features, but also with some important differences. Both the Umbrellaand Excess liability polices provide an additional layer of liability protection in excess of you primary underlying insurance polices, such as your automobile, homeowners, general liability, etc. However, an Excess  policy is only that, excess over the policies named in the schedule. It does not enhance or broaden any coverage, just follows as more liability coverage over the named policies.

An Umbrella policy on the other hand, does all the same things as the Excess policy AND can drop down to be a Primary coverage under certain circumstances where there is no underlying liability coverage. For example for you liability assumed as the member of a Not for profit board, or for personal injury(libel, slander, false arrest, etc.) liability.

The distinction between the 2 types is very important and applies whether you are buying for your business or personal insurance needs. It is very important when comparing Excess or Umbrella policies. Though some standardization amongst carriers has begun, there is still significant variance between insurance carriers in their unique policy language. The most important area to look at in the policy language is the Definitions and the Exclusions. There is where you will find the meat of the coverage.

Most insurance companies today only offer the Excess form of the extra coverage. They may call it and umbrella policy, but in fact it is only an extra layer of coverage intend to "follow form" over the polices it names.

Regardless of whether or not you can get an Excess or Umbrella policy, it is important that you contact your independent insurance agent to see about securing this extra protection for you or your business. After all, if you are driving around with your assets in the front seat of your car, wouldn't you want to make sure they survive the accident?