Take an Umbrella

Life is unpredictable. As careful as we try to be in our own activities, we can’t control the actions of others, nor the damage to other people and their property that may involve our property or family members.

To cover these eventualities, your insurance policies for your home (homeowner, tenant, or condo), vehicle, or boat includes personal liability insurance. It protects you and members of your household against claims resulting from injuries and/or damage to other people or their property. But if a serious accident occurs, you may quickly find yourself responsible for damages that exceed the limits of these insurance policies.

Liability Claim Trends

Lawsuits are becoming increasingly expensive. “A $5 million case 10 years ago would have been rare. Now it is not,” says Erik Knutsen, professor at the Queen’s University faculty of law, who focuses on insurance, wrongful acts litigation, and civil liability. In fact, the size and frequency of high-dollar liability settlements has given rise to a new term: ‘nuclear verdicts’ are settlements or jury awards of $10 million or more. While most nuclear verdicts relate to corporate liability, they are setting trends for all liability claims – including personal liability.

A homeowner’s insurance policy may typically include $1 million in personal liability coverage. Your basic ICBC vehicle policy includes $200,000 in third-party liability, which can be increased up to $5 million. That may be ample for your level of risk, but it’s prudent to assess your exposure and talk to your insurance broker. Increasing the amount of liability coverage on your home, auto, or boat insurance is one option. Another is to purchase an umbrella insurance policy.

Extend Your Coverage

An umbrella insurance policy extends your third-party liability coverage beyond the limits in your current insurance policies, and also provides coverage for:

• Claims like libel, slander, defamation of character, and invasion of privacy.
• Legal defense costs like attorney fees and other charges.

Umbrella insurance does not cover:

• Damage to your personal property; that is covered by your primary home, auto, or boat policy.
• Damage to your business property or losses related to the running of your business. This exclusion applies even if you operate your business from your home. Talk to your broker about specific coverage for your home-based business.
• Intentional acts, for example, if you intentionally harm a visitor to your home.

Active people will appreciate the extra protection an umbrella policy affords; it’s impossible to predict an accident that might result in a lawsuit, and it’s so easy to cause an injury serious enough to exceed your liability coverage limits. Purchasing umbrella coverage makes sense if you have high-value assets or if you participate in activities that increase your risk of accident and legal action, such as:

• Ownership of more than one property, and/or renting out property
• Ownership, use, or operation of watercraft, snowmobiles, all-terrain vehicles, motorcycles, dirt bikes, scooters, e-bikes
• Ownership of trampolines, other play equipment, swimming pool, or hot tub
• Coaching sports or partaking in high-risk activities, such as skiing, snowboarding, skateboarding, waterskiing, scuba-diving, mountain-biking, mountain-climbing
• Setting fires, such as in a backyard fire pit or rubbish barrel
• Ownership of dogs and other animals
• Babysitting or other temporary or part-time work of insureds under 21 years old
• Volunteer work
• Hosting or organizing social gatherings where alcoholic beverages are served.

What if You’re Sued?

If you’re sued, you’ll first rely on your home, auto, or boat liability insurance to cover the costs associated with the lawsuit. But lawsuits can be expensive, and if your liability claim exceeds the limit in your standard insurance policy, you’ll be responsible for the remaining balance – if you don’t have umbrella coverage, that is. If you do have umbrella coverage, it will respond after your standard liability coverage has run out, meaning you won’t have to dip into your savings, sell a major asset, or worse, file for bankruptcy, to cover the balance.

The personal umbrella policy is one of the best insurance values in that it offers millions of dollars of coverage for a nominal charge. It’s a cost-effective way to fill liability coverage gaps between your basic home, auto, boat, and other personal insurance policies. However, the coverages and limits provided by insurance companies vary; your insurance broker can explain liability coverage options and tailor solutions to your needs.