Do I need an umbrella insurance policy?

Published January 01, 2018

Executive Vice President 

If you've ever asked yourself whether you or your business need an umbrella insurance policy, this true story of two teen pedestrians, an adult driver and a fatal crash on a well-traveled road may help you decide.

The nighttime accident in May 2017, which left one of the teens dead and the other injured, has led to lawsuits against the driver of the SUV that struck them, the owner of the company that owns the SUV and the company itself. Despite a police report absolving the driver of fault in the accident, the families of the teens are seeking payment for damages including loss of companionship and protection, mental pain and suffering, funeral expenses, medical bills and more.

Even if the suits fail, the cases will be expensive to defend, with legal fees certain to go well into seven figures. Of course it the suits succeed, the losses the defendants will incur will be far greater.

In this case, the defendants include two wealthy philanthropists who are fixtures of the society pages in Sarasota County, Fla., but based on accounts of the accident, the driver could have been anyone. Was the driver negligent, as the lawsuits claim? That will be determined in court.

Whatever the outcome of this tragic case, the lawsuits themselves will serve as reminders of the need to protect one's self and one's business with an umbrella policy, also known as excess liability insurance.

How umbrella insurance works

Umbrella insurance supplements basic liability policies. For business owners, this includes the general liability, auto and workers' compensation policies while personal umbrellas will enhance the home, auto, boat and recreational vehicle policies. As the Trusted Choice network of independent insurance agents notes in its Umbrella Insurance FAQ, "An umbrella policy covers a much higher limit and goes above and beyond claims directly relating to your home and auto." Your business too.

Here's an example of how an umbrella policy works: In the event your company or you personally are deemed to be at fault for a serious injury, resulting in a settlement against you, your underlying (auto, home, general liability) policy will pay its full limit, and then the umbrella will pay over and above the underlying policy. So, if the settlement is for $1 million and you have a $300,000 limit on your underlying policy, that policy would pay the full $300,000, and then the umbrella policy would kick in and pay the remaining $700,000. Without the umbrella, you or your business would be on the hook for the $700,000.

The cost of defending a lawsuit is included within the limit, so defending the company and its owner in the example of the Florida case also would be included under the umbrella. The personal umbrella contains a business exclusion, so it is extremely important that all business owners purchase both a commercial and personal umbrella policy. If these policies are not in place, the defendants could face financial ruin.

Commercial umbrella: a must for business owners

Liberty Mutual Insurance, one of multiple companies Sylvia Group works with to design customized business insurance programs, cites a U.S. Chamber of Commerce estimate that small-business owners in the U.S. "pay more than $35 billion per year in out-of-pocket liability costs" for claims that exceed what their commercial general liablity (CGL) insurance covers.

Liberty Mutual offers these actual claim scenarios as examples of why umbrella coverage is so important.

  • An electrician installed a faulty system in a commercial property and a fire destroyed the property. The resulting claim was $3.5 million in excess of the electrician's primary coverage.
  • An intoxicated customer was involved in an auto accident after leaving a restaurant. Claim in excess of primary coverage: $1.75 million.
  • A shopper fell down the staircase at a shopping center and was severely injured. Claim in excess of primary coverage: $2 million.
Could your business survive such a claim? 

Personal umbrella: a bargain for families

In addition to providing vital protection, personal umbrellas offer great value, typically costing less than $1 per day for a $1 million policy, with coverage ranging up to $10 million.

And attention parents of teenage drivers: Dependent teens on your auto policy also are covered under an umbrella.

The Independent Insurance Agents & Brokers of America, of which Sylvia Group is a member, offers a number of real-life personal umbrella claim scenarios, including this one:

The insured’s 18-year-old son was driving the insured’s car on a short trip to the store with his girlfriend, the claimant. The car left the roadway and struck a tree. The insured’s son told the police that a vehicle cut him off, but there were no witnesses and no evidence of any impact with another car. The claimant has no recollection of the accident. The claimant, a 19-year-old college student, was hospitalized for over a month with multiple fractures and internal injuries. She was in a wheelchair but is now able to walk with crutches and continues with physical therapy. She has a right drop foot as a result of the injuries. The insured’s personal umbrella policy limit was paid.

It's worth your time to read the other scenarios, as well. They illustrate the kinds of unforeseen tragedies that could involve almost any of us and underscore how having the right kind of insurance coverage can provide at least financial salvation when such bad things happen.

The value of an independent agent

Sylvia Group's Business Insurance and Personal Insurance divisions work with dozens of companies to design coverage programs that protect our clients, their families and their futures. Using a consultative approach, we'll work with you to determine what you have in assets and how much coverage you need to protect them. You'll come away with not only the insurance program that's right for you but also with the peace of mind that comes from knowing you've gained valuable coverage through an agency that looks out for the interests of your business and values you as a person.


About John Beauregard and Sylvia Group

John-56 cropped.jpgDuring more than three decades as a business insurance professional in Massachusetts and Rhode Island, Sylvia Group Executive Vice President John Beauregard has built relationships with clients by recognizing and addressing their unique risks and needs, providing them with the best available coverage and delivering dedicated, dependable customer service, particularly in the medical manufacturing, municipal, education and transportation insurance markets. A Certified Insurance Counselor (CIC) and Licensed Insurance Adviser (LIA), John works with clients to help them secure what they've invested in and built, evaluating the risks they face, developing customized policies to protect against those risks and creating comprehensive risk-management programs designed to save them money by reducing premiums.

Sylvia Group helps businesses and individuals protect their future by designing insurance, employee benefits and financial planning programs. We’re a third-generation, locally owned agency known for our commitment to our clients and our community, as well for our industry expertise. Founded in New Bedford, MA, in 1950, headquartered in neighboring Dartmouth, and serving businesses and individuals throughout Massachusetts, Rhode Island and beyond, Sylvia Group is certified as a Woman Owned Business Enterprise with the Massachusetts Supplier Diversity Office and has the distinction of being the first six-time recipient of the Five Star designation awarded by the Massachusetts Association of Insurance Agents (MAIA) for all-around agency excellence.

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