We ALWAYS discuss the need for an Umbrella policy with our clients – here’s a great explanation from an attorney that reinforces the concerns that should shape your choices regarding primary and excess coverage! Whether you have assets and wealth to protect or not, an Umbrella policy should be part of your risk management program.
If you’d like to make sure the coverages you have in place are sufficient to meet your needs give us a call, we’re happy to provide you a review and audit at no charge!
Author: Jack Lessor
“Umbrella Insurance? What is it?
In the simplest of terms, “you don’t have to be a millionaire to be sued like one.” Contrary to popular belief umbrella policies are not just for the wealthy. Like an umbrella that protects you from the rain, an “excess liability policy,” commonly known as an umbrella policy provides an extra layer of insurance for coverage over your standard liability policies for covered claims.
An umbrella can protect your existing personal assets, your earnings and future earnings. If you were to lose a lawsuit, in excess of your auto and home liability limits, you would likely have to pay the winning party for pain and suffering, medical expenses, lost wages, etc. Even if you have no assets your wages can be garnished.
Who needs an Umbrella Policy?
Whoever drives a motor vehicle in the State of (insert your state here) should consider this coverage a must-have regardless of their income or lack of assets. The majority of claims filed under umbrella policies are auto-related, and since virtually all of us drive it should be a no-brainer. Here’s why.
There are** several million cars on the road without liability insurance; there are millions of cars on the road with inadequate liability limits, in the event of a serious or fatal accident.
An umbrella policy with $1 million in coverage (up to $5 million available), adding the Uninsured Motorist (UM) Underinsured Motorist (UIM) Rider will offer you a minimum $1,250,000 in coverage in the event of an accident that causes serious injuries or death, and you are not at fault.
In the event the accident is your fault your interests are protected to the limit of the policy.
Here is an actual occurrence that recently occurred:
Accident occurred on a 6-lane roadway, separated into 3 lanes in each direction by lane marking.
Vehicle #1, was traveling east in the left lane of a 3 lane roadway. Vehicle #2, was traveling west in the left lane of a 3 lane roadway making a left turn, and struck vehicle #1, causing driver’s neck to be broken in 2 places, plus other injuries, and totaling the vehicle. Driver #2 was 100% at fault. While attempting a left turn, failure to yield to on-coming vehicles is a prima facie case; vehicle #2 is negligent unless the vehicle had a green arrow.
Driver #1 had $100/300.000 bodily injury and uninsured motorist limits. They did not have an umbrella policy, and, therefore, could not have UM/UIM coverage. Driver #2 had a policy with $100/300.000 in coverage. Driver #1 collected $100,000 from both the other driver and their own UM/UIM. As driver #1 was left with chronic pain for the rest of their life, attorneys involved agreed that this could have been 7 figures.
Why do I need an Umbrella Policy? In case you are negligent.
- You have a momentary distraction while driving. Even the best driver can cause an accident with serious injuries, or even death.
- Your swimming pool attracts both invited and uninvited guests, regardless of the tallest fence or the most thorough precautions.
- Your teenager, while driving friends to a school event, runs a stop sign causing a major accident.
- You seriously injure a water skier while boating.
- While playing golf you hit someone causing a serious head injury.
- Today, parents can be sued because of something their teenagers write on Facebook. A blog post about a CEO, an entertainer or anyone could result in a defamation lawsuit.
Whether these lawsuits from traditional or newer risks are valid or not, customers often have to defend themselves, which can cost many thousands of dollars in out-of-pocket expenses, if an umbrella policy is not in place.
How much do I need?
The right umbrella amount depends on where you live, your profession, your personal assets, future income and assets, etc. Liability coverage in home and auto policies rarely exceeds $500,000, yet “13% of personal injury liability awards and settlements are $1 million or more,” according to the report, citing data obtained from “Jury Verdict Research. ”
The amount of coverage you choose should bear some relation to your net worth. If you’re worth $1 million, a $1 million dollar umbrella is not going to protect you from a $2 million dollar judgment, since it would still be worth a lawyer’s time to go after your personal assets. It is not unusual to hear of $2 million, $5 million, or even $10 million court judgments against individuals.
Underlying Insurance Requirements: What is required?
Because an umbrella policy is designed to be a form of secondary insurance, it will have underlying insurance requirements. This means you will have to obtain a certain amount of auto, home, and boat, coverage as a condition of being approved for an umbrella policy.
Personal Injury exposure such as false arrest, libel, slander, malicious prosecution, etc., is different from bodily injury and property damage, and are defined separately in liability policies.
- Auto insurance: Bodily Injury coverage of $250,000 per person/$500,000 per accident.
- Auto Insurance: Property damage coverage of $100,000 per accident.
- Homeowner’s insurance: Personal liability coverage of $300,000.
- Homeowner’s insurance: Personal Injury coverage may not be automatic in the homeowner and umbrella policy. Some homeowner policies require an endorsement to add the coverage for an additional premium. To avoid having a “gap” in coverage you should make certain that personal injury coverage is provided in both the homeowners and umbrella coverage.
Who is covered? (Check your own policy)
- The insured and spouse; if the spouse is living with the insured
- Resident relatives
- Household residents under the age of 21 who are under the care of the insured
- Anyone using a vehicle with permission of the insured; owned by the insured; covered under the umbrella policy.
- Any person or organization that is legally responsible for the insured, while the insured is using a covered motor vehicle
What is covered? (Check your own policy)
Here are some of the prominent items covered by umbrella liability insurance: It is wise to check your own policy.
- Additional protection above your auto, homeowner, boat or rental property policies.
- Protection from claims by others for personal injury or property damage caused by you, a member of your family or household, or hazards on your property.
- Personal liability coverage for occurrences on or off your property.
- Protection against non-business personal injury liabilities such as slander, libel, false arrest or wrongful eviction.
- Legal defense costs and associated court costs for covered loss. If you are sued and held liable for $1 million, and your legal defense costs are $200,000, then a policy providing $1 million in coverage will pay the full claim plus the $200,000 for legal costs.
- Some policies provide worldwide coverage. An accident in a foreign country where your present liability insurance does not apply. For example, if you want to rent a car or jet ski when you are on vacation in Europe, you are covered.
What are some exclusions? (Check your own policy)
Some umbrella policies may be “follow form,” which means that if the coverage is not covered in the homeowner policy, then there is no coverage by the umbrella.
- Intentional torts or other willful acts by the insured (tort: an action, other than a breach of contract, that wrongly causes harm to someone, but that is not a crime, and is dealt with in a civil court)
- Damages arising out of business or professional transactions
- Intentional acts, such as sexual harassment, discrimination, assault
- Committing a crime (such as driving under the influence) and are forced to pay restitution
- Drag racing or any other high-risk unnecessary use of your vehicle
- Damage to your own car or residence (your auto and homeowners policy should cover it if not excluded)
- Directors and Officers Liability
WORDS FROM JACK LESSER, AUTHOR
Can you imagine the grief and terror that a family must feel when an automobile accident, causing the occupants to suffer serious injuries, renders them unable to work and earn a living? NO YOU CANNOT! Unless you’ve been through it yourself, it’s incomprehensible!
You might want to run your eye back over the last paragraph and appreciate every word of it, because the greatest misconception that people have is that it always happens to the other guy. Never to them. But, to the other guy, you’re the other guy.
From my soon-to-be 40-years of insurance experience (28-New York, 11-Florida), one of the most important things that I’ve learned is “there’s only one way to write insurance, and that’s the right way.”
Taken to the logical extension, I believe that not protecting yourself, and your family, with the aforementioned coverage could have far reaching implications for your lifestyle and well-being.
This is not a hair-splitting exercise in semantics; it is fundamental coverage that must be in place if your drive a vehicle. Other insurance programs are available to protect your lifestyle and the lifestyle of your loved ones.”
What happens if my air conditioner, furnace, refrigerator, dishwasher, oven, well pump etc. breaks down?
– Do you have a home warranty?
– Did you know that most homeowners insurance policies offer an equipment breakdown endorsement at a fraction of the cost of your home warranty policy?
– Did you know that you can include personal food and medicine loss related to refrigeration breakdown for up to $500?
– Did you know that many home warranty companies contract repair with several different companies and you have no choice in the matter?
1) As noted above, Home Warranties have several additional considerations and risks beyond the typical homeowners policy. Most homeowners policy carriers offer this as an additional endorsement for as little as $25-$35 per year.
2) Failure to place adequate coverage for your risks means you could be forced to pay large sums out of pocket or wait for days or even weeks for repair or replacement.
3) Failure to correctly insure your property could also mean the uncompensated loss of refrigerated or frozen goods.
Contact us for assistance reviewing your current policy to make sure you have the coverages you need.
You’ve been mapped into a Special Flood Hazard Area, now what?
Must you resign yourself to paying flood insurance premiums for as long as you own the property?
FEMA’s approach to floodplain mapping is not granular enough to provide a confirmed determination for each property owner. If you have a current Elevation Certificate in hand that indicates that the property is not actually at risk because the elevation data indicates the structure was properly ‘floodproofed’ during design and construction, then you likely meet the minimum qualifications to request removal of the property or structure from the floodplain through the Letter of Map Change process.
FEMA allows all property owners, except those placed in AO flood zones, to submit a Letter of Map Change request for issuance of a LOMA or LOMR or LOMR-F depending upon the individual circumstances of your situation. Those circumstances will also determine whether FEMA will charge a fee for the submittal process.
Our flood expert started as a licensed flood insurance agent in 2005 and has submitted or assisted in the submittal of hundreds of Letter of Map Change requests. During that time, only two requests have been denied by FEMA; one of those was successfully argued and the denial was overturned, and the other is still under review as of this writing.
Our success is your success! If you’d like to explore the possibility of getting rid of your mandatory flood insurance premium give us a call and we can discuss the next steps.
The short answer? It depends on your situation.
The longer answers:
I want to purchase flood insurance:
- If you qualify for a ‘Newly Mapped’ policy, no Elevation Certificate is required to place coverage. Additionally, if you qualify for a ‘Newly Mapped’ policy and have an Elevation Certificate, the EC won’t make a difference in your premium for several years.
- If you are purchasing a property that requires mandatory flood insurance and the last map revision was more than 12 months ago, you will need a current Elevation Certificate to place a National Flood Insurance Program (NFIP) policy.
- If you have a property like that described in #2 above you have the option in most states to purchase flood insurance through an alternate carrier that does not require an Elevation Certificate. This option is available in all states except AK, DC, HI and KY with some geographical limitations and only available for homes in an A/AE/AO flood zones. The good news is that this carrier offers increased structure and contents limits beyond those offered by NFIP ($250,000 structure/ $100,000 contents). The alternate carrier currently offers up to $750,000 structure/ $200,000 contents.
I want to remove my property from the floodplain:
- A current Elevation Certificate will be required along with several other legal documents to submit your Letter of Map Change to FEMA requesting removal of the property from the floodplain.
- The Elevation Certificate must be on the most recent Department of Homeland Security approved Elevation Certificate form, and must include the benchmark datum used, pictures taken after the most recent FEMA map revision date and be stamped and be signed by a Registered Land Surveyor or Civil Engineer with stamp and signature dated more recently than the most recent FEMA map revision date.
- Even with an Elevation Certificate, a property in an AO (alluvial fan) floodplain cannot be removed from the floodplain without additional documentation of ‘As Built’ measures to remediate or provide erosion control.
– Do you drive a car less than three years old?
– Do you have a lease agreement of 12-36 months, a loan of 60 months or more, or own the car outright?
– Did you know that GAP insurance coverage is available through most auto insurance policies at a fraction of the cost charged by the finance company?
1) Your standard auto insurance policy does not include coverage to pay for the entire value of the vehicle (even if a loan or lease is involved) if a total loss is incurred during the first 3-4 years of ownership or when leasing.
2) Failure to place coverage for your risks means you could be forced to pay thousands of dollars out of pocket if your car is totalled and you don’t have GAP insurance.
3) Failure to correctly place GAP coverage means that you are likely paying hundreds of dollars more per year to the finance company than you need to. GAP coverage charges paid to the finance company are typically $15-25 per month while the same coverage provided through your auto insurance policy will typically be $25-35 per year.
4) New Car Replacement Coverage is another option offered by some auto insurance carriers that provides for current model year replacement in the event of a total loss. This coverage is only available for autos purchased as new and only if New Car Replacement coverage is placed within 365 days of purchase.
Contact us for a full review and audit of your current auto policy to make sure you have the coverages you need.
Have you recently been mapped into a FEMA floodplain?
Don’t panic, there may be options.
When FEMA maps your home into a Special Flood Hazard Area (SFHA) it’s because the calculated Base Flood Elevation (BFE) suggests that your home, based on surrounding topography, is in an area with an increased risk of flooding. Or, also defined as the 100 year floodplain – or has a 1% risk of flooding in any given year.
[SFHA – A Special Flood Hazard Area (SFHA) is an area identified by the United States Federal Emergency Management Agency (FEMA) as an area with a special flood or mudflow, and/or flood related erosion hazard, as shown on a flood hazard boundary map or flood insurance rate map.
BFE – The computed elevation to which floodwater is anticipated to rise during the base flood. Base Flood Elevations (BFEs) are shown on Flood Insurance Rate Maps (FIRMs) and on the flood profiles. The BFE is the regulatory requirement for the elevation or floodproofing of structures. The relationship between the BFE and a structure’s elevation determines the flood insurance premium.]
That 1% risk in any given year may seem low but, statistically speaking, if you live in the same home for the life of a 30 year mortgage you have a 1 in 4 (26%) chance of being flooded. That’s why you are considered to be in a ‘high risk’ area.
However, not all property owner risk is equal. Why?
FEMA does not manage the SFHA at the property level when establishing floodplain boundaries. So, if you think your property has been inappropriately drawn into the floodplain there are a series of steps that can be taken:
1) Acquire an Elevation Certificate
2) Review the Elevation Certificate to determine: Does the property qualify to request removal from the floodplain?
3) If ‘YES’ to #2 above, submit to FEMA requesting removal of the structure/property from the SFHA
4) Wait for FEMA Flood Zone Determination Letter informing you of the decision
In the meantime, if flood insurance is required by your lender, take advantage of ‘Newly Mapped’ program rates rather than allowing the lender to provide force-placed coverage. Force placed coverage is typically provided by the lender at a cost of $2400-$3600 annually while ‘Newly Mapped’ coverage is only $475 as of the date of this post.
‘Newly Mapped’ coverage is available as an option for 12 months from the date of the FEMA map revision. However, a lender is required to implement force-placed coverage 45 days after their initial notice to you that the property has been placed in an SFHA. So, don’t allow the lender to provide force-placed coverage thinking you have plenty of time to take advantage of the ‘Newly Mapped’ program.
Not only is force-placed coverage expensive, but it can be difficult to get the lender to refund the force-placed premium even if you are able to get out of the floodplain within 12 months of the FEMA map revision date.
Have questions or need assistance with any of the above? Give us a call, we can help!
Unlike other property and casualty policies like home or auto insurance, flood insurance can only be cancelled if you meet very specific requirements and refunds are only issued, in a handful of circumstances, if you meet even more stringent requirements. For example, if you have a successfully received a Letter of Map Change from FEMA and you are in a mandatory flood insurance area, you may cancel your current flood insurance policy and you may then request a premium refund.
However, keep in mind that your lender has the right to require that you keep flood insurance in place. In that case, the Letter of Map Change is still helpful because it also allows you to place a less expensive ‘Preferred Risk’ flood insurance policy.
So, whether your lender allows you to get rid of your flood insurance or not, once the Letter of Map Change has been issued, you will be able to request a premium refund from your flood insurance carrier for the policy premium paid as the result of the ‘mandatory flood insurance’ requirement.
But, you may have to turn around and spend a portion of that refunded premium to put the less expensive flood insurance in place. Sound complicated? It can be and usually is unless you are very familiar with the process.
Congress recently changed the amount of refund given to a property owner for flood insurance premiums paid. These changes are published in the April 1, 2016 NFIP changes documentation provided by FEMA. As indicated, you are due a full refund LESS the Federal Policy Fee, Probation Surcharge and HFIAA Surcharge.
Additionally, unless you received your Letter of Map Change within the last 60 days of the prior policy term, you will only be eligible to receive reimbursement of applicable flood insurance premium for the current policy term.
Questions? Give us a call!
Did you know that Arizona is one of the worst states in the country for Uninsured and/or Underinsured Motorists?
We’ve all heard that a picture is worth a thousand words – so take a look at the infographic we’ve created here that tells the disturbing story.
Spoiler alert: 1 in 6 drivers on the road in the United States is ‘Un’ or ‘Under’ insured, and that number increases to 1 in 3 for Arizona drivers.
If that doesn’t scare you, it should!
Once you are done reviewing the infographic, give us a call to review your current auto policy to make sure you are adequately and ‘Accurately’ covered!
Did you know that most insurance carriers do not provide coverage for this property type?
Did you know that most insurance carriers will deny any claim for a property used as a short-term vacation rental?
Most property owners understand that a long-term rental must be insured under a specific type of insurance policy. That policy is called a ‘Dwelling Fire’ policy. Several questions must be answered regarding the types of perils to be covered, the amount of personal property to be covered, even whether or not Extended Liability coverage needs to be provided to an LLC that holds title to the property. (Yes, we recommend placing the property in the name of a separate entity for several reasons associated with risk management!)
However, short-term rental properties are not covered by the standard Homeowners policy (HO-3, HO-5 or HO-6) or by the standard Dwelling Fire policy (DF-1, DF-2 or DF-3). You will instead need to find a carrier that provides vacant property property coverage that includes short-term rental coverage as well as this type of policy will be written and rated with consideration for the higher risk associated with a short-term rental property. Additionally, you will also want to make sure that your guests are purchasing Accidental Rental Damage Insurance to provide coverage for any accidental damage that may occur during their visit. This type of insurance coverage will also eliminate the need for security deposits too!
If you own a rental property, whether vacation rental, short-term or long-term, you need to make sure your current insurance policy provides the coverage you need. More importantly, you need to know how coverage is triggered.
We can help provide coverage that will be triggered in the event of an accident. Don’t wait until it’s too late to find out that you don’t have coverage. Contact us for a complimentary review and audit of your current coverage
Will a ticket affect my insurance premiums? Most likely!
Here’s an example of just how different rate increases can be from carrier to carrier:
For a driver in Apple Valley, Minnesota, with two speeding tickets 11 mph over the limit, one carrier wouldn’t return a rate at all; five others increased rates anywhere from 13 to 121 percent.
The attached chart shows average premium increases – this is for the entire US – based on quotes from more than 490,000 policy holders.
Not all carriers will increase your premium at the same rate, and this is just one more reason why an independant broker is always better!