I have been selling property and casualty insurance in Arizona on a continuous basis for thirty-eight years. In addition to actively procuring insurance for clients, I teach insurance at a local community college, teach insurance professionals for continuing education (“CE”) and I have consulted and been an expert witness on over forty cases in Arizona.
As an expert witness I have been involved in several insurance cases that involved both individuals who had an umbrella and found coverage and individuals who wished they would have had a deeper understanding of the importance of having an umbrella before they faced a large claim that would have provided coverage.
In my opinion a true personal umbrella is one of the most economical under-purchased insurance products. A true personal umbrella policy is just what you would imagine in a storm it goes over a person’s underlying coverage to protect against a claim, like an umbrella protects a person in a rainstorm. This requires the proper insurance underlying coverage, or the individual pay the difference between what the insurance covered and what is required before the personal umbrella triggers.
In the insurance world there is a huge difference between a personal excess liability policy and a true personal umbrella. When given a choice as a consumer always go with a true umbrella. The simple difference is an excess policy is going to only cover if there is an underlying policy whereas a true umbrella policy is going to cover more than just underlying policies. With a true umbrella policy there may not be a policy directly under the umbrella, but rather there will be what is known as a drop-down coverage. The coverage drops down until it reaches what is known as a self-insured retention (“SIR”). Why is it called SIR? A person is self- insuring for that amount then the umbrella is triggered. On a true personal umbrella policy the SIR is going to usually range from $250 to $1,000 then the personal true umbrella triggers.
An excess liability policy and a personal umbrella policy usually can range in limits depending on the insurance company from limits of one million to ten million. An excess liability or true umbrella policy goes over a persons’ auto, home, and licensed or unlicensed recreational vehicles, and personal rental dwellings provided the person reports this information to their insurance producer or insurance company.
Many people do not realize that the only assets in Arizona (other than through a trust) that can be protected are the assets through the Homestead Act”. In Arizona the “Homestead Act” allows a person to protect the equity in their home from judgements for up to $125,000 and if a person has owned their home for more than five years the person may protect up to $150,000. Contrary to popular belief, a peron’s retirement account is not protected from judgements in Arizona. An excess liability policy or umbrella policy is a very good way to transfer risk to the insurance company.
A huge benefit a true umbrella policy offers is the territory is worldwide. This is unlike an auto policy that has a territory of the United States, Puerto Rico, Canada, and U.S. territories. Arizona borders Mexico. Everyone knows they need to buy Mexico Insurance, but what is not often realized is that coverage is for Mexico, what happens when there is an at fault accident with another vehicle and the suit is brought back to the United States? A person will be glad they spent the money on a true umbrella policy with drop down provisions. What happens if there is an at fault accident while renting a car in another country? A true personal umbrella has a drop- down provision.
Another great feature of a true personal umbrella is not only the bodily injury provision but also the personal injury provision. This is for slander, libel, and defamation of character. How many people have teenagers who regularly use Facebook, twitter, or snapchat? Do you think there is a loss exposure?
Then there are the recreational vehicles such as motorhomes, boats, jet skis, all terrain vehicles, motorcycles etc. A person needs to report all of these to their insurance producer or insurance company to have them included under their excess liability or umbrella policy, so coverage can be provided.
Every person in my opinion who has personal rental property needs to declare and include all of their rental dwellings under an excess liability or personal true umbrella policy. The risk of a liability loss is much greater for a person who owns rental property.
I welcome your questions if you would like to contact me regarding this article.