Sometimes, life's bittersweet music of chance hits a really bad chord. And that's when umbrella liability insurance coverage-or excess liability coverage-can help your client.

Maybe it's black ice in front of his house and somebody trips on his gravel. Maybe it's an auto accident where he happens to be a hair above the legal blood alcohol level. Maybe he's in a tangle on the road and ends up paralyzing another driver or killing a bicyclist.

Whether you believe in Murphy's law or favor the teleological position that everything happens for a reason, sooner or later, people often find themselves on the business end of a big lawsuit, and the half-million or so in homeowners insurance isn't going to cut if a child gets hurt on a trampoline in your client's backyard. Or if there's an accident in his swimming pool. Or if his dog bites somebody. Maybe one of his errant golf balls smacks somebody in the head or he gets sued for sexual harassment. Or his child libels somebody on the Internet.

Have you done enough to make sure that they are covered? In other words: Have you reminded them of getting excess liability insurance? Very often, they don't have enough, and you may make life easier for these clients later if you push them to get it now-and send them back to the property and casualty agent.

Basic homeowners insurance normally taps out at about $500,000. Car insurance can sputter out at $300,000 to half a million. Where those policies leave off, umbrella policies take up the slack, kicking in and providing the excess coverage for a much bigger claim. Such policies can sometimes even drop down in situations where for some reason the insured person cannot collect from the primary underlying policy (as long as they aren't specifically excluded by the underlying policy). In some instances, says Loretta Worters, vice president at New York's Insurance Information Institute, personal umbrella policies may also tackle losses that don't qualify for the underlying liability insurance, in other words, they "drop down."

Almost all insurance companies offer umbrella coverage, but many won't go above $5 million in coverage. To go above that, the sterling names for the wealthy are Chubb, AIG, Fireman's Fund, the Hartford and Atlantic Mutual, according to New York's Insurance Information Institute.
The best part is, this insurance is still very cheap-starting at $200 to $500 a year for a million in coverage. Many planners say that, if you've got any substantial assets to protect, there is no good reason to not get it.

"I would always strongly recommend it because they are not real expensive," says Brian Boak, a personal insurance specialist with Singer Nelson Charlmers, a Teaneck, N.J., firm that sells policies for clients and in many cases provides independent analysis of them. "You can get $1 million in excess liability for between $250 and $500 a year, and then every million on top of that is, say, another $150 or so. Once you go to $5 million, then the next step is generally $10 million and then $15 million to $20 million. I can get $50 million in excess and $100 million if I have to."

Given the increasingly high sums being paid out by defendants in personal injury suits, there are those who believe even a million is not enough coverage anymore. "Most people should have more than a million," says Dick Weber president of insurance consulting firm the Ethical Edge Inc. in Carlsbad, Calif. "And here's the example: My close friend's wife was in an automobile accident, and while there still seems to be some question of whether the other driver was perhaps going over the speed limit-or she, in turning left, had a legal left-all of that pales to the fact that the other driver was injured to the point of being paralyzed for life. Now there are lots of real expenses associated with that. There is the vast consideration of pain and suffering and there is the consideration of this young man's livelihood being limited by his physical limitations."

Excess liability coverage has often been deemed the private preserve of the ultra-wealthy, but advisors say that, given how cheap it is and how far it goes toward protecting vulnerable assets, anybody in a multi-million-dollar lawsuit (in other words, anybody with a pool, a dog, or teen drivers at home) could be taken to the cleaners if they don't have it.

Missing Inaction

However, despite its value and low cost, many are without it or they are underinsured. Some planners insist that it is undersold by the property and casualty agents who are supposed to be its most vigorous defenders.

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