There are many websites online that show the US as having
the highest amount of lawyers per capita and some showing that the US is in
second place internationally. Regardless
of what statistic is completely accurate, I think it’s safe to say the US has a
ton lawyers. With a ton of lawyers comes a ton of law
suits.
So, what does this mean for you? You drive safely, have a fence around your
pool, always supervise children on your trampoline, are careful about who
operates your watercraft and even only let close family or friends go to your
second home. But with all this “stuff”
and all these “activities” comes exposure, and a lot of it.
We always recommend our clients have personal liability
coverage, regardless of who they are, what they have and how old they are. We are still all at risk. Because a bulk of the coverage comes through
a policy called an umbrella policy or excess liability policy, I’d like to
share with you some options that these policies may offer you.
·
Defense
costs: Some insurance contracts say that the defense costs are part of the
limit you choose and some pay the costs outside of the limit. So what’s better? If you have the choice, always chose outside
of the limit. This leaves the $1M, $5M,
$10M, etc. limit you choose to pay for damages to the other party or a
settlement and the $100K or more of legal fees you incurred are paid completely
separate.
·
Available
Limits: There is a myth in the
marketplace that individuals cannot obtain limits above $5M. This is not true. There are many carriers who offer limits well
above $5M and some all the way up to $100M.
Clearly everyone doesn’t need this high of limits, but I say with
confidence that all people should have an umbrella or excess liability limit of
some sort.
·
Employment
Practices Liability (EPLI): Sometimes individuals and families have people
who work for them directly. Now, to be
clear, I am not speaking about having a cleaning company come to your home or a
landscape company; I am talking about John Doe coming to your home to clean
regularly and when you pay John, the check reads his name or the cash is handed
to him. If this is true for you, you
might want to see if you can obtain EPLI coverage on your umbrella policy. Some companies offer this coverage as an
endorsement for a certain number of employees.
What this pays for is defense costs and settlements for employment
related matters. The best example I can
share is imagine you hire an individual to clean your home. This individual has family overseas and
notices you have a home phone. The
individual decides to call her family overseas one day for just a couple
minutes. This quickly becomes a routine
thing and you notice that your phone bill has skyrocketed. You promptly terminate the individual. The individual comes back complaining that
you fired her because she was foreign.
This coverage would protect you from a suit that individual may place
against you.
·
Non-for-Profit
Directors & Officers Coverage:
You’re trying to do some good for the world. You want to volunteer your time on a
board. Did you know there’s exposure
that goes along with this? The most
common response I hear is “Well the board has $1M of coverage for us.” Well, how many board members are there? Because this limit is split between all the
members and as soon as the limit is exhausted, anything else may be up to you
and the other board members personally. This
coverage can be added to some excess liability policies for certain types of
non-for-profit boards.
·
Excess
uninsured/underinsured motorists: Okay so you’ve done a great job choosing
your limit to protect your assets, but why should you trust that everyone else
has enough coverage or assets to pay for your medical bills if they hit
you? Answer? You shouldn’t. This coverage is available on some umbrella
policies up to $10M and is available to cover you and anyone in your vehicle if
you’re hit by an uninsured or underinsured driver. The coverage (just like other coverags on an
umbrella policy) sits above your auto policy, the uninsured/underinsured
motorist portion specifically.
·
Third
Party Liability: This is very similar coverage to the excess uninsured/underinsured
motorist coverage, but is an entirely different coverage. Let’s say you are at a friend’s house for a
pool party. Someone dropped some queso
on the pool deck and you’re quickly trying to make your way to get the last
mini corndog. You slip on the queso and
fall straight into the pool hitting your head on the way down. I can almost guarantee you will end up with
some medical bills, a hospital visit, potentially some lost time at work, if
not more. If that friend only has
$100,000 in homeowners liability, they may not have enough to pay for your
medical bills. That’s where this coverage
comes in. It will pick up (first dollar
paid out if necessary) you medical bills, lost wages, etc. What won’t this pay for? The corndog you never got to eat, but I’m
sure that’s the least of your worries.
The next logical question is how do I choose what limit is
right? Which of these coverages I really
need? That first question is another
topic to come. Stay tuned.
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