The Importance of High Liability Limits

By October 11, 2018 Premier Insurance
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It is no secret that clients with a higher amount of investable assets have significantly more to lose when it comes to high-limit lawsuits. An effective personal risk management plan complete with premier carriers and high liability limits can help protect those assets for generations to come.

13% of personal injury liability claims are settled over $1,000,000. However, a large portion of the population with a considerable amount of wealth do not carry umbrella policies. Additionally, if they do carry an umbrella policy, they carry inadequate liability limits. Standard insurance carriers do not typically provide adequate liability limits to properly protect against large legal settlements and judgments. Therefore, umbrella and excess liability insurance policies are a good investment to protect a client’s assets.

Umbrella policies provide excess liability protection over underlying home and auto coverage. Umbrella policies pay out when underlying coverage limits are exhausted. Typically, home and auto policies provide a maximum liability of $500,000, which is inadequate to provide coverage for a successful client’s risk exposure.

Basic umbrella policies start as low as $150 and they are among the most inexpensive insurance policies, given the high liability protection that they provide.

Claim Scenarios
  1. A client hosts a large party at their residence. One guest gets overly intoxicated and is in an accident on his way home from the party, injuring his wife and another family. The guest sues the host of the party and the court awards damages exceeding $5,000,000.
  2. A client’s 16-year-old daughter babysits three young children in her free-time and sets up a baby pool in the backyard. The babysitter runs inside after the 5-year-old daughter. When she returns outside shortly after, the 2-year-old boy had drowned in the pool. The boy’s parents sue the babysitter’s parents and are awarded over $10,000,000.
  3. A client’s dachshund bites their son’s friend in the face when he picks him up. The injury requires reconstructive surgery and the court awards damages against the client of $3,000,000.
What is the right amount of liability coverage?

Our general rule of thumb is to carry an umbrella that covers your net worth, rounded to the next million. However, an inventory of your lifestyle, risk factors, and profile can help determine a more accurate figure. For example, if you have multiple kids who are all of driving age, multiple employees that work at your home, or regularly host events at your residence, these would all increase your need for a higher limit of liability on your excess policy.

If you or your clients have a significant amount of investable assets, ask your trusted insurance advisor about your risk. You should also consider a premier carrier that offers high excess liability limits beyond $5,000,000.

An insurance advisor at Sterling Coverage can help review your liability coverage to ensure that you are property protected. Please reach out to us with any questions.