How much can you afford to lose?
That may seem like a depressing way to start a conversation with your client, but as their risk manager and advisor, it is a necessary one that you should be having annually. Your client’s answer to this question will help you outline the necessary excess and umbrella coverage that could save them from financial ruin.
Too often we hear the cautionary tales of clients whose business faces a tragic accident with uninsured losses that are over and above their liability policy. These costs create severe financial distress and in many cases, force the business into bankruptcy.
This is where excess and umbrella coverage comes into play.
What’s the Difference?
Excess coverage provides increased limits on top of your underlying scheduled policies and literally “follows the form” on the primary policies. After primary coverages have been paid, excess coverage may also pay defense or other costs outside of the policy limits. On the other hand, umbrella coverage overlays most of a firm’s primary coverage with increased limits attached to each of the policies. Umbrella coverage also offers broader coverage and generally more comprehensive protection. After primary coverages have been paid, clients may also use their umbrella coverage to pay for defense costs when involved in litigation.
Delivering Coverage to Your ClienT
In approaching the topic of excess and umbrella coverage with your client, we recommend focusing your questions around the following areas:
Review changes from the past year
- How does revenue compare to previous years?
- Has payroll dramatically increased or decreased?
- What type of liability injuries have occurred?
Expect the unexpected
- What is the maximum that the client can afford to lose and still operate their business?
- What other exposures does the business have that might need additional protection?
Do your homework
- Understand the parameters associated with higher limits and the benefits to the client
Research well beyond the limits your client “thinks” they need –the client will appreciate the attention to detail, and advance planning will help minimize any potential errors or omissions exposures. Ultimately, excess and umbrella policies deliver for your clients a more complete protection of their assets. And the cost is typically a fraction of the premium they are paying on their primary policies. Seems like a no-brainer? We believe excess and umbrella policies are a necessity that most businesses cannot do without.