Welcome back to another pro tip, specifically for financial advisors. Today’s hot topic? Umbrella Insurance! When most people think of insurance, primary policies, like Homeowners or Auto, are among the first to pop in their mind. However, an Umbrella policy can be equally important, as it provides liability coverage over and beyond primary policies. Umbrella coverage kicks in when the primary policies’ maximum limits have been reached, assuming there are no coverage gaps (don’t worry, we talk about this below).
Here are a few things to be aware of as you navigate and help your clients understand Umbrella Insurance:
Imagine your 18-year-old has a short lunch break at school, grabs a couple of friends, and drives them to a lunch spot. Distracted, he hits a Bentley filled with lawyers. Ohio is an at-fault state, which begs the question: Is there enough liability coverage in your auto policy for an accident like this? This is when an umbrella policy might make all the difference.
When building an Umbrella policy, there can be unintended coverage gaps if the primary policies are not written with the maximum liability coverage available. This means, in the event of a large liability claim, a client would be responsible for the difference between the limit of the primary policy and the lower limit of the umbrella policy. Some insurance carriers have a quoting system to ensure coverage is seamless and a package of policies cannot be sold that contain these gaps. Other carriers, however, depend on the insurance agent to know the limits and quality-check policy proposals before issuing.
If any of your clients are international travelers, this is an important one! Umbrella policies typically provide global coverage. For example, a client is driving in Spain and has an accident. Since the accident occurred outside of the coverage territory, the Personal Auto policy will not cover the accident, but the Umbrella policy typically will after a self-insured retention requirement (like a deductible) is paid.
Analyzing a client’s exposure to expensive lawsuits involves several considerations, including public visibility, wealth (or perceived wealth), business interests or partnerships, to name a few. This is where an insurance agent can add immense value to your clients!
Here at Heritage Insurance Advisors, we’re happy to help you preserve the wealth that you have helped your clients create.