This post was written by John Lewis.
Our business and high net worth (HNW) clients often seek our advice when it comes to protection of their personal assets from lawsuits. While asset protection planning can be a useful exercise for many HNW individuals, personal liability umbrella insurance coverage is an often overlooked cornerstone of asset protection.
Umbrella insurance is a liability policy which overlays your auto and homeowners insurance, is available in coverage amounts of $1 million or greater, and is designed to protect you from lawsuits when the liability coverage on the underlying policies has been exhausted. Equally important is that umbrella coverage will pay for your legal defense costs.
HNW individuals might typically be targets of lawsuits with large dollar value claims from typical causes such as auto accidents and home visitor injuries, but also less typical claims such as libel, slander, business reputation claims, or lawsuits arising from service on non-profit boards.
Not all umbrella policies are equal, so it is important to consult your broker as to the best policies available. Insurers such as Chubb and Pure are particularly known for writing umbrella policies which insure HNW individuals for $5 million and up with premiums in the range of $1,000 per year for $5 million of coverage.
What does umbrella insurance not cover? For HNW individuals who are business owners or who serve on boards of other companies, umbrella coverage will not typically insure your business liability as a director or officer. If you are on a company board, you should make sure that your service is protected by the company securing appropriate levels of D&O business coverage, typically no less than $10 million of coverage, because one D&O policy can quickly be eroded when multiple directors are named defendants in a single lawsuit.