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Should I Use a Personal Automobile Policy for my Company Car?

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Automobile insurance covers the owner of the car, the driver of the car, and/or an insured driving a temporary vehicle. If the company owns the vehicle, the company needs to provide liability coverage for its risk of operating the vehicle on the road.

As a driver, you need liability insurance even if you don’t own a car. Drivers are held responsible regardless of ownership. Entrepreneurs who own a company car and a personal car need both policies.

If you drive your car for business, the company still needs liability insurance to protect against the risk of operating a vehicle on a public road. Tangential issues include:

Pick-up trucks and vans are excluded from business use in many personal automobile policies. Claims will be denied under these conditions.Courts have been “piercing the corporate veil” recently. If the business and individual are judged to be too closely tied financially, corporate limited liability can be lost. Separating business from personal usage avoids IRS problems when allocating deductible expenses.  Keep liability clearly separated. A business issue can destroy your unrelated personal wealth.If employees are transported in your personal car, workers compensation coverage blurs into personal liability. Is driving to lunch business or personal? If another employee drives your car causing you an injury, you are exempt from your liability policy.

Too many scenarios can occur to confuse commercial coverage with personal coverage. If you work for a company as an outside sales representative and drive your own car, use a business use personal policy. If the company owns the car, your personal automobile coverage will provide liability insurance for you personally, but not the company. If you don’t own a vehicle, but drive a company car personally, purchase a non-owners personal policy.

Whichever entity owns the vehicle – titled name – requires liability insurance. Commercial automobile coverage is designed for automobiles, trucks, vans, pick-up trucks, assorted delivery vehicles, even dump trucks. Rating, that is premium generation, considers multiple drivers of mixed experience and more miles driven.

Personal automobile policies do not anticipate non-family operators on a regular basis. Usually, the application asks who will be driving the vehicle regularly. It is not favorable to list several employees.

The cargo transportation industry has its own truckers form. Garages and repair shops carry garage keepers coverage. The insurance industry creates forms and policies that fit the unique needs of different business models.

Strangers on Your Property and Attractive Nuisances: What’s Your Liability Exposure?

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Strangers may come onto your property for all sorts of reasons:  a child chasing a ball that accidentally landed in your yard; a meter reader; customers for a yard sale, etc.  What’s your liability exposure, and does your homeowner’s insurance policy provide the coverage you need?

There is normally no particular care required of property owners to safeguard people who come onto their property whether the person has been invited or is a trespasser.  However, if there is a dangerous condition on the property that is not readily apparent and involves something man made, the owner or occupier of the property may have a duty to warn both strangers and guests of that danger.  If, for example, there is a hidden electrified fence, or a bridge that looks safe but is actually rotten and dangerous, you might have a duty to post a warning to protect anyone who might come onto the property.  If you fail to warn about a dangerous condition and a person becomes injured, you will likely be partially, and perhaps totally, liable for the injury.

Whether you have insurance coverage under the personal liability section of your homeowners’ policy would depend on the insurance company’s investigation of the event.  If investigation reveals that you were aware of the danger and didn’t take reasonable care to prevent people from being injured, the company would likely deny coverage.  It might even cancel your policy and you might have difficulty getting a new one.

The duty to warn of a dangerous condition is generally not applied if the hazard on the property was created by nature or the result of natural processes.

“Attractive Nuisance”

Insurers call an item that might attract children an “attractive nuisance.”  An attractive nuisance is any object that can be dangerous or deadly to a child, but the child is too young to realize the danger.  Swimming pools are the classic example of something that would attract a child and could also be very dangerous to a child.  If there is anything on your property that might attract children — such as pools, fountains, machinery, old appliances, or stacks of building materials — you have a special legal responsibility to try to prevent any child who might wander onto your property from being injured.  Property owners or occupiers can be liable for injuries a child may sustain when investigating an attractive nuisance — if they have failed to take reasonable precautions to prevent children from being hurt.  Most natural conditions, such as a lake or a naturally steep bank, are not considered attractive nuisances.  To be liable for injury, the owner or occupant of the object must create or maintain the harmful object.

Obviously, the attractive nuisance concept applies to anything that might attract small children, but it may apply to older children as well if the child was unlikely to understand the danger.  The owner is more likely to be found liable if children were known to play in the area and he failed to take reasonable precautions to prevent the injury.  Reasonable precaution will vary depending on the item.  Locked fences around swimming pools, trampolines, or old machinery; removing doors from old refrigerators; and storing construction materials safely are some reasonable precautions.  Often, such measures are required under local laws.  The law doesn’t require owners to childproof their properties but it does expect people to be alert to potential dangers to children and to take reasonable steps to prevent harm to those too young to understand the danger.

Ask your insurance agent what precautions you should take concerning dangerous but necessary objects — for instance, swimming pools, wells, or machinery. If the company requires a fence, install it, or you could lose your coverage. And, don’t be surprised if your premiums increase for the pleasure of having a pool, trampoline, or other attractive nuisance.

Design-Build Insurance Issues

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Managing design-build risk for any entity is something that requires careful consideration. There are many differences between design-bid-build projects and design-build projects. One of the most prominent differences is insurance coverage. In both types of projects, all parties share goals and have individual concerns. Since contractual relationships in these two types of projects vary, so do the methods of balancing risks.

Understanding Liability Concerns
If a problem arises when the owner has separate contracts with the designer and constructor, it is easier to distinguish whether the problem is a design flaw or a construction mistake. However, the law has a statute of limitations for design errors and building functionality. Both types of issues can result in messy and complicated lawsuits as time passes. For example, if a building experiences air quality problems two years after its construction, the cause of the problem could be shared by two or more parties involved in its design, construction and maintenance. When these issues turn into insurance claims, the parties involved often realize that their coverage is inadequate. Since insurance for these projects has changed in the past decade, the need for evaluation is crucial. Discuss the new changes, insurance requirements and helpful suggestions with an agent.

How To Solve Insurance Deficiencies
For those who are relying on general liability coverage, it is essential to have modifications made to the policy. For example, companies that perform design-build work should add the design-build rider or the means and methods rider. Adding a rider closes the deficiency gap for liability coverage in a general policy. Another beneficial addition for design builders is contractor’s pollution liability with a fungus inclusion. This affords protection from mold that results from damages. Another option instead of the combination of CPL and CGL riders is a contractor’s protective professional and indemnity policy, which is commonly called a CPPI. This type of product includes pollution and professional liability. Since the individual options are complicated, it is best to discuss them with an agent. To get a clearer picture of what should be done to enjoy the strongest protection, consider the following liability tips:

– Make sure the policy includes errors and omissions, which is layered as excess over the E&O coverage for architects.

– Study the rules for the extended reporting period.

– Ensure the policy period meets the project’s requirements.

– Carefully examine the terms, conditions and exclusions of the policy.

– Make sure the claim notification procedures are understood.

– Instead of asking for only a certificate of insurance from contractors and sub-contractors, ask to see the policy itself.

Importance Of Bonding
Many people in design building misunderstand bonding. Surety bonds are made between the surety and contractor to benefit the owner. They are classified as a credit instrument. While they are meant to benefit owners, brokers usually sell them. Owners should always ask for a total performance bond in any design-build project. If they are not requested, many types of unintended consequences can produce a messy situation. It is important to ensure that the design builder purchases surety products that include the contract’s entire cost. To learn all of the insurance issues for an individual project or company, discuss them with an agent.

Why You Need an Umbrella Policy?

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Do you have enough liability insurance?  If there were a vehicle accident for which you were at fault, and a child were permanently disabled, would your auto liability policy offer enough coverage to pay for the skilled care the child would need for years to come?  If a young parent were killed in a freak fall on your property, would your insurance cover the support he would have provided his children as they grow up?  We’d all like to believe that such catastrophic losses would happen only to other people.  But there is nothing we can do to totally eliminate the risk of this type of event in our own lives.

Consider what would happen if there were a settlement (or judgment, if it goes to court) of $800,000 as a result of an auto accident for which you were liable.  Let’s say you have insurance with a limit of $300,000 per accident.  What would happen?  The auto insurer would pay its $300,000.  Then virtually everything you own would be fair game for seizure to pay off the additional $500,000, except for assets that may be protected in some states, such as your home.  Furthermore, your earnings could be garnished for years to come.   With stakes this high, and considering the relatively modest cost of additional liability coverage, it just makes sense for many people to purchase the added protection of an umbrella policy.

An umbrella policy is insurance that provides additional coverage once the liability limits on your homeowner’s or auto insurance policy are exhausted.  Umbrella policies are typically sold with limits of $1 million to $10 million.  In the example above, if you had a $1 million umbrella policy, once you satisfied the deductible, the auto insurer would pay the auto policy limit of $300,000, and your umbrella insurance would pay the other $500,000 of the $800,000 settlement or verdict.  Your assets would not be at risk.

One myth about an umbrella policy is that it’s only needed by the wealthy.  These days the cumulative value of homes, vacation homes, rental property, cars, boats, savings, investments, and so on, owned by many people, who don’t consider themselves wealthy, make them vulnerable to liability beyond their auto or homeowner’s insurance limits.  A good question to ask yourself is whether you have assets that you don’t want to put at risk in the event of a catastrophic liability.

Lifestyle also plays a role in determining liability risk.  Do you have a swimming pool, trampoline, swing set, or other recreational equipment that can lead to accidents?  Are there frequent guests on your property?  Do you engage in sports that could injure others?  Do you live in a wealthy town where you might be more of a target for a liability lawsuit?

How Much Do You Need?

People often reason that the amount of umbrella coverage they need should be the value of their assets, but this might not be adequate.  If, for example, you have assets of $1 million and buy $1 million of coverage, what happens if you’re found liable for a $2 million judgment?  Insurance would pay the first $1 million, plus the limit of the underlying homeowner’s or auto policy, but you could lose a significant amount of your assets for the second million.  If you were found liable for $3 million, you could lose not only a significant portion of your assets, but you’d still owe $1 million.  Both your future income and any inheritance you might receive would be jeopardized.   Just how much coverage you need depends on all your risk factors, your own financial planning, and your tolerance for risk.

There is usually a substantial premium discount if you buy your auto, homeowner’s, and umbrella policy all from the same company.  Additionally, if you have a claim, you eliminate the potential problems of dealing with different insurance companies where each might be trying to shift payment responsibility to the other, leaving you caught in the middle.

The cost of an umbrella policy depends on such criteria as the amount of coverage, the insurance company issuing the policy, and your own ‘personal risk factors’ (such as the number of traffic tickets you’ve gotten in the past few years, and possibly your credit report).  A million dollar policy often costs less than a dollar a day.

For some people another attractive feature of an umbrella policy is that it provides coverages not found in their homeowner’s or auto policies.   You are covered if you cause bodily injury, property damage, or personal injury.  Generally, the types of personal injury covered include false arrest, false imprisonment, malicious prosecution, defamation, invasion of privacy, wrongful entry, or eviction.  Some umbrella policies also provide coverage if you face liability arising from your service on the board of a civic, charitable, or religious organization.

Your insurance agent can help you decide whether an umbrella policy makes sense for your life style and financial needs.

5-Step Construction Quality Assurance

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Planning Construction projects such as roads, industrial structures, stadiums, bridges, homes and various commercial buildings bring the need for a quality assurance process. Since even a tiny defect or flaw in any of these construction projects can have dangerous effects, it is imperative to develop a plan before construction begins. It is also necessary to monitor the quality assurance plan’s effectiveness throughout the span of the project. The cost of implementing a good quality assurance program is small in comparison with the possible large amount of money required to deal with the effects of lapses, defects and flaws. To better understand what a quality assurance plan in construction should include, consider the following steps.

  1. Define Requirements
    This should always be the first step. To accomplish this task, determine what the needs of the customer are. Listen carefully to the customer, and rephrase ideas to ensure their needs are fully understood. The structural designs of the project should be determined by the customer’s specific needs. In the design phase, it is also important to decide on types of material to use. Define the standards for the structure’s construction to determine what components must be included in the quality assurance process. It is also important to consider surrounding factors. For example, the soil and construction site must undergo several tests to check climatic conditions. All parties involved must be certain to comply with any environmental protection laws. By considering these laws during this first phase, it is easier to incorporate them into the decision of materials and design planning. Keep in mind that the site should not pose a pollution threat to bodies of water nearby. Sound pollution must also be minimal, and it should not cause inconvenience to people who live nearby.
  2. Material Requirements
    After the initial project requirements have been defined, it is necessary to list all of the materials and supplies that will be used. Be sure to include their respective specifications. Note any brand requests, and add reminders for materials that must be certified. All of these details are necessary to ensure that the chosen materials match the quality and design needs for the project.
  3. Planning
    Once the material planning is finished, start developing a plan for the task’s completion. This plan should clearly outline the workflow. Invite several tenders to obtain the building material and supplies. During this process, document each step for future reference.
  4. Material Testing
    It is imperative to test the materials before using them. During this process, third parties or internal laboratories test the composition of the chosen materials. Whether private or internal labs are used, a uniform set of work quality standards from various institutes dictate decisions. Issues such as steel’s tensile strength or the compression strength of bricks are tested. Based on the results of tests or trials, the chosen materials will be approved or disapproved.
  5. During Construction
    In this final step, quality assurance is measured throughout the construction process. Supervisors must ensure that all standards outlined in the previous steps are upheld. Several different quality assurance measures should be taken to reduce the likelihood of any breaches. Supervisors must also check workmanship quality and conformance. With the help of external and internal audits, quality checks are stronger. If quality control supervisors find any components to be below the set standards, they must determine the cause. After this, they must develop a rework plan to fix the issue.

Since the cost of rework is very high, quality assurance should never be neglected. In addition to this, the liability issues connected with poor design quality can be detrimental to a company’s budget and reputation.

Let an Umbrella Policy Be Your Safety Net

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There comes a certain point in your life when you can look back with a sense of pride at what you have been able to accomplish. Your hard work has paid off and you now are the proud owner of a nice house, a great vacation home, a luxury car and all the other amenities associated with the good life.

If you have reached this stage of your life, you are now wealthy enough to be vulnerable to lawsuits.  Incidents can occur in your day-to-day activities that could potentially cost you.  For example, the elm tree in front of your home could fall onto a neighbor’s house, and in the process, pull down electrical wires that start a fire, burning the neighbors house to the ground. Depending on the neighborhood, replacement costs for the house could be several million.

Or perhaps you have just been named to the board of your favorite non-profit. The organization is being sued for personal injuries that occurred during their annual bazaar. As a board member you are also liable and can be sued.

If you’re like most people, you feel confident that your homeowner’s and car insurance will protect you if you fall victim to a claim arising from normal activities. What you should be aware of is that while these policies do include liability coverage, the amount of coverage usually tops out at $300,000.

To protect assets, people need to increase their coverage with an umbrella policy. Umbrella policies take over after the liability insurance in your homeowner’s and auto policy stops. The umbrella policy will pay claims above the liability limits you currently have, up to the limit you have selected.

Since the major portion of the risk is assumed under the primary auto or homeowner’s policy, personal liability umbrella insurance is inexpensive. You can buy a $1 million or larger umbrella policy for about $200 a year.

Many carriers prefer to sell umbrella policies to clients who have both their auto and homeowner’s insurance coverage with them. Your insurance company may also require that your primary liability limits be a certain amount. Umbrella policies are generally sold with a deductible ranging from $250 to $1,000. Your carrier covers you if your actions cause bodily injury, property damage, or personal injury to someone else.

The broadest coverage under an umbrella policy is probably the personal injury coverage because it includes coverage against false arrest, false imprisonment, malicious prosecution, defamation, invasion of privacy, wrongful entry, or eviction. Your homeowner’s and car insurance policies cover bodily injury and property damage, but not personal injury. You can also buy umbrella policies that include coverage if you are held liable in the course of serving on the board of a nonprofit organization.

Another important aspect of this type of coverage is it not only pays damages, but also lawyer’s fees and defense costs should you be the defendant in a lawsuit. Even if a lawsuit is obviously a nuisance suit, you still have to pay the costs for mounting a defense. In this age of rising litigation expense, it is reassuring to know that you are well equipped to handle it before the need arises.

Reduce Premiums? Reduce Risk with Loss Control Strategies

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Business owners know an injury to an employee or severe property damage destroys productivity; so all losses should be avoided or reduced.

So why do insurance loss control representatives’ visits and the ensuing safety recommendations bother business owners so frequently? Is it the nuisance that any disruptive visitor might be? Is it the money to implement loss control strategies?

Insurance companies understand that the frequency of claims, that is the number of claims, predicts risk levels much more accurately than does the severity of claims.

Insurance company recommendations tend to reduce the frequency of claims. In the long run, reduced frequency leads to better experience and greater discounts. Selfishly, you should implement loss control recommendations that lead to lower costs.

For small business, as defined by one that cannot afford an in-house full time safety officer, the insurance company loss control representative acts in that capacity to review the overall loss control picture. Use this service to your advantage.

The insurance company wants to reduce risk as much as you do. Of course, the company is less concerned about the budget to do so when you’re fulfilling their recommendations.

So, what can you do about costly compliance measures? Ask the loss control representative for help. These professionals are in the field all the time and see many solutions to the same problems. They will have some cost effective ideas.

What other proactive measures can a business owner implement? First, a loss control survey, sometimes called a risk management survey, outlines every process, job, piece of equipment, or operation with regards to safety.

Once your safety concerns are identified, you can manage the risks in two ways: loss control measures or strategies. A loss control measure reduces the frequency of claims. A strategy eliminates or reduces risk.

Loss measures include installing equipment safety devices, controlling environmental conditions, and supplying proper protective gear. Right now would be a good time to solicit feedback from the insurance loss control representative. They have valuable experience in this area.

Manufacturers and contractors are familiar with equipment safety devices, such as guards on saw blades or operator cages. Ergonomics has become a popular form of loss control that ties into safety devices. Differing control knobs, placement of controls and sight lines improve operator efficiency and eliminate unsafe habits.

Environmental controls, for example ventilation and lighting, reduce worker fatigue, unhealthy air quality, and poor visibility. Injuries decrease in frequency as a result.

Proper protective gear may seem a bit old school, but safety is the test of time. Goggles, gloves, hard hats, protective clothing, and even proper work clothing can help to reduce claims.

Installing guards and providing equipment protection is half the battle. Safety must be taught to the employees at all levels for an effective loss reduction program. New and old measures should be embraced by management and implemented correctly.

Insurance loss control departments are a good source for safety lesson plans, posters, or even direct employee meetings to teach and discuss safety issues.

Loss control strategies eliminate or reduce risks. Prevention, avoidance, transfer, and separation are examples of viable strategies.

Prevention strategies anticipate future problems. A business may carefully screen driver applicants with background checks, records, and road testing to preclude poor operators from damaging valuable vehicles or injuring third parties.

Avoidance eliminates existing or potential risks. The business screens drivers unsuccessfully; and therefore decides to eliminate its fleet and use common carriers. The business has avoided all risks associated with operating vehicles, but not those associated with shipping products.

Separation segregates risk. The business decides to build a second manufacturing site rather than place both lines in the same building. The risk of both lines being destroyed at the same time is greatly prevented because the exposures are separated.

This strategy may allow one site to shut down for difficult maintenance while the second site continues filling orders. Better maintenance is a safety measure granted by the separation strategy.

Transfer strategies include: contractual transfers, subcontracting work, and buying insurance. Transferring is usually a legal risk reducing strategy.

Purchasing insurance is a strategy to fund claims. The business may not technically be reducing losses, but it is keeping those losses – premiums – at a tolerable level. This strategy brings us back to listening to the insurance company recommendations.

If you proactively manage the input rather than withhold feedback to the safety representative, in the long run, you will focus on the important issues, eliminate the intolerable risks, and attain affordable insurance premiums.

Umbrellas Are Not Just for Rainy Days Anymore

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One of the most important insurance policies you can buy is the personal umbrella policy, but many people are unaware they need one. Consider that lawsuits happen every day and if you were sued, would you have enough money to cover your attorney’s fees and possible judgments? Most homeowner’s and automobile policies offer certain protections to cover legal liability, but is it enough? If you are concerned about your ability to cover all the possible expenses of a lawsuit, you should consider purchasing an umbrella policy. This insurance policy will cover you if you cause bodily injury, property damage or personal injury to another party.

Umbrella policies also offer protections that traditional homeowner’s or auto policies do not cover, including false arrest; libel or slander; invasion of privacy; wrongful entry; eviction and more. While an umbrella policy offers additional protection, there are still claims that are not covered. For example, if you own a business, only a business insurance policy will cover general liability claims. Most umbrella policies do not cover punitive damages. Additionally, some umbrella policies are only available to policyholders who carry both their homeowner’s and auto insurance policies through the same insurance carrier.

Since umbrella policies are tapped only after the liability limits from your homeowner’s or automobile policies are exceeded; they are usually quite inexpensive. A policy with a million dollar limit can usually be obtained for $200-300 dollars per year.

Personal umbrella policies are growing in popularity. In the past, only wealthy individuals and families purchased this coverage. Today, middle-income families also may procure this policy for protection in our society’s increasingly litigious climate. As the tendency to sue for damages rises and awards granted by the courts grow, the personal umbrella policy is increasingly seen as an insurance necessity rather than a
luxury.

In particular, you should consider purchasing a personal umbrella policy if you have certain characteristics or engage in certain activities, including the following:

– Your total assets are greater than your underlying liability limits.
– You are financially responsible for the actions of a young,
inexperienced driver.
– You live in an exclusive and affluent neighborhood.
– You have a high profile career or high income.
– You frequently host guests on your property.
– Your residence includes a swimming pool.
– You own waterfront property, a farm, or a ranch.
– You own watercraft, aircraft, or off-road vehicles.
– You own numerous rental properties.
– You engage in extensive international travel for pleasure.

Workers’ Compensation Experience Rating

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How does safety pay dividends to the business owner? Time and resources spent on developing a culture of safety repays the business in the long run. Safety cultures rely on reducing the number of workers compensation claims, in return, the odds of a disastrous claim are reduced.

Business owners with workers’ compensation experience modifications above 1.25 need to review their safety policies with professionals. It is possible one year or even one claim causes this situation; but it should not be ignored. Discover and repair the root cause.

A 1.01 to 1.25 modification indicates worse than average experience. State rates can be less than adequate for a short period of time. The actuarial or mathematical calculations just incorrectly reflect the average expected claims. Slightly elevated modifications may be caused by these issues; however, review your losses by department in these cases and see if a problem area exists.

For slightly elevated modifications, review the safety program and types of losses. Seek out a professional risk manager for help if needed. Look for patterns in the losses, and consider changes in safety equipment or procedures to reduce problem issues.

Proactively nurturing a safety culture will pay long-term dividends. Experience modifications will decrease with positive results. How?

Each state calculates workers’ compensation experience modifications independently. Many states do utilize the services of the National Council on Compensation Insurance (NCCI) to gather data and promulgate base rates and experience modifications; but each state regulates its own workers’ compensation system.

Workers’ compensation experience rating predicts future behavior by analyzing past performance. It is a consequence of loss control performance, neither a reward for no losses nor a punishment for too many claims.

The generic formula for experience modifications follows some rules:

Just as payrolls are the basis for the standard premium, they form the basis for expected claims. Payroll is multiplied by an average claim factor to produce total expected claims.A discount factor is then applied to predict the potential severity of the claims.The product of this equation is expected losses.Actual medical only (MO) claims combine and report as a number of claims/total amount. Some states designate the MO claims as primary (maximum average) and excess, and then apply a discount rate to one or both of these amounts.Most states set a limit on the value of any one claim, and then discount large claims on a sliding scale.This historical claim experience is divided by expected losses. That quotient is the experience modification.

The insurance industry spends millions of dollars to find ways to predict the future. Loss analysts discovered one important fact: the best predictor of future claims is the frequency with which companies suffer losses in the past.

Frequency reflects the number of claims per employee, usually expressed as claims per payroll unit ($100), claims per year, or claims per time unit. Frequency, however, more importantly, reflects the safety culture of the business.

If the frequency of claims is predictable, how about the severity of an individual loss? No, severity, the magnitude of the loss, is not predictable. With greater frequency, however, comes greater odds that a severe claim will occur.

Experience modifications indicate the status of the safety culture within a business. Good management listens to risk management and loss control experts who ultimately reduce workers’ compensation costs.

Umbrella Insurance Protects You from More than Just Weather

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Although you have probably heard of umbrella insurance, there’s a good chance you have no idea what it is. An umbrella policy is designed to protect you from almost everything that your homeowner’s and auto insurance policies do not, as well as fill in gaps in coverage when the limits of these policies are exhausted.

Lawsuits are filed daily against ordinary citizens, with reasons ranging from the frivolous to the justified. More often than not, people have no extra protection to block the plaintiff from going after their personal assets in the lawsuit. Umbrella insurance will protect you from this type of situation.

An umbrella is often referred to as excess liability. This excess liability coverage kicks in when the underlying limits on your homeowner’s or auto policy have been exhausted, or if you are sued personally for something that neither your homeowner’s nor your auto insurance covers. Depending on the insurance company, you can purchase anywhere from 1 to 5 million dollars worth of excess coverage, and sometimes as high as 10 million.

The amount of coverage you select depends on how much you are worth. If you have 5 million dollars worth of personal assets, you should get a 5 million dollar umbrella.  It is not uncommon for someone to buy a 5 or 10 million dollar umbrella policy even if that number far exceeds their net worth, because the coverage is so inexpensive to purchase.

Most insurance companies will not offer you umbrella coverage unless you already have both your homeowner’s and auto policies with them. Also, the insurer will require that you maintain a certain level of liability on the homeowner’s and auto policies in order to qualify for the excess policy. Usually, you must maintain at least $250,000 of bodily injury liability per person, $500,000 per accident, and $100,000 for property damage for your autos, and $500,000 of liability for your home.

The good news is that coverage is cheap. It is possible to obtain 1 million dollars worth of excess liability for just over $100 per year. The more cars and homes you have, the higher the premium, but the cost is still low. In addition to your home and cars, liability associated with any other conveyances you may have, such as boats, motorcycles, and other recreational vehicles, may also qualify for coverage under the umbrella, depending on the insurance company.

You are probably wondering when the umbrella coverage would ever be used. As an example, if you are involved in a car accident where you crashed into a pedestrian who was walking on the sidewalk, resulting in medical expenses that cost more than what your auto policy covered, the umbrella policy would kick in. Or, if the pedestrian decided to sue you for negligence and punitive damages, your umbrella can be utilized to cover your legal expenses and to pay any judgments levied against you.

You should also know that the excess liability covers you for all sorts of things that have nothing to do with your cars or homes.  For example, coverage includes personal injury protection, which includes false arrest and imprisonment, malicious prosecution, defamation, invasion of privacy, wrongful entry, or eviction.

Also, some umbrella policies provide coverage for you if you are sued in connection with any charitable boards or organizations of which you are a member. You may have to contact your insurance company and pay an extra premium for this type of coverage.

Hopefully this has helped illuminate the importance of having umbrella insurance. Without it, your personal assets are vulnerable in any lawsuit or legal action. The risk of a multi-million dollar lawsuit greatly outweighs the cost of protecting yourself with an umbrella policy. Give us a call to us about what type of policy might be right for you.