This is a frequently asked question, especially when one is considering an Umbrella or Excess Liability Policy. Several factors can come into play in your decision making process.
BOTTOM LINE FIRST!
There is no answer to "How Much"! Sorry. Even attorneys have no answer for this. Every accident will involve different circumstances, damages, people, property, attorneys, etc.
The one constant here is "Umbrellas are for larger claims situations; BIG accidents"!
However, there are factors to consider. We've listed a few below!
HERE'S A FEW BULLET POINTS
- Due to large claims cases that we are aware of, and what we have learned in seminars, we always fear that a client of ours will have a big claim, and not enough insurance! Higher limits give us more peace of mind, and are better for our clients too! (just in case).
- Umbrella Policies are sold to millions of companies nationwide. They definitely come into play from time to time and are necessary for continued defense and potential settlement limits in larger cases. It is a more catastrophic accident involving a disability or death that causes the Umbrella need. Examples may involve a customer, an employee or a 3rd party getting injured or killed. A large claim involving "property" damage, or other damages, can occur as well.
- A business may want higher liability limits over their commercial auto liability, Workers Compensation Employers Liability and of course their Commercial General & Products Liability to name a few. Depending on the circumstances, they may have other exposures where they would seek higher liability limits.
- OUR INSIGHT #1: A seminar we attended a few years ago had three claims adjusters as guest speakers for a room full of insurance agents. These three adjusters only handled "Large Claims" expected to settle for $1,000,000 or more.
An Agent asked: "How much should we be recommending"?
"One of the adjusters gave the following example"
What if your client hit another car and seriously hurt a 5 year old child in the back seat. What if that child becomes a special needs child and is handicapped for the rest of their life. The life expectancy could be another 70 years. That's 70 more years of problems, expenses, pain & suffering, lost wages, personal care, medical expenses, etc. Bottom line, "mathematically", a 5 Million Dollar Umbrella may not be enough, ... and that's for one child disabled. You can't ever know or say "How Much". There is no answer for that!
What if your client is at fault hitting a school bus and injures or kills multiple children?
- OUR INSIGHT #2: Lawyers tend to follow the money and the insurance. If a person and/or entity has low insurance and minimal assets or net worth to pursue, but they cause a large claim accident and are being sued, ... it may be difficult, if not impossible, for the claim to be settled where it should be damages-wise. In these situations, the "garnishing of future wages/incomes" may be a consideration for the courts and the settlement. On the flip side, incurring an injury or death caused by a larger corporation will be pursued more readily in efforts to settle awards for both the injured party, and the Law Firm. If you have assets, net worth, investors, potential future growth, employees, etc., etc. to protect, you will want to consider Umbrella excess liability limits! Bigger companies know this! We insured plumbing companies who must carry 3, 4 and sometimes 5 million dollar limits if they want to do work for some of their bigger clients (i.e. cities, utilities, airports, hospitals, etc.) We have residential Condo HOA's carrying similar Umbrella limits because they have so many homeowners and interested parties to protect. Restaurants (chains), retail, Real Estate, Manufacturing, and more secure higher limits in many cases. The list can go on!
- OUR INSIGHT #3: Depending on what your risks & exposures are, what you need to protect, how many people are depending on you, what your assets and net worth levels are, coupled with your cash flow, insurance budget and yes, your "risk tolerance", these are all factors that will help you determine "How much" you may want to implement.
ATTORNEYS & GOOGLE (for additional insight):
- NOTE: We have nothing to do with the above law firms. We do not know them, endorse them or work with them. They are just examples to Google and read. Feel free to Google the topic. Many more will pop up. This may or may not be of assistance in helping you choose your limits(?). Many of our clients in choosing their limits also must consider "budget"! Although everyone may want a several Million Dollar Umbrella, .... what does that cost?
ASK FOR A QUOTE!
(then decide)
