Insurance Insights: The Cleary Insurance Blog
The Cleary Insurance blog covers insurance, risk management, and financial planning for New England businesses and individuals. Our team of licensed advisors and specialists publishes regular articles on commercial and personal coverage, employee benefits, life and financial planning, and insurance compliance. Browse recent articles below, or use the category filters to find topics relevant to your business or personal situation.
When it Rains it Pours
Umbrella insurance is extra liability insurance. It helps to protect you and your assets from major claims and big-ticket lawsuits. An umbrella insurance policy provides liability above and beyond the limits of your insurance policies and may cover claims that are excluded by other liability policies.
No matter how hard you try to avoid them; accidents happen. If you were to cause a major auto accident involving property damage and or extensive injuries to other parties, your hard-earned assets could be at risk. The costs of the property damage, injuries to other parties, and or subsequent lawsuits add up quickly and may exceed the limits of your auto insurance in no time. It is not simply auto accidents you need to worry about. There are other types of accidents as well. Imagine this: You’re having a graduation party and someone slips, falls, and is injured. Think you won’t be sued? Think again. In today’s society, lawsuits are common…and costly. A lawsuit has the potential to destroy your financial security, but an umbrella insurance policy may protect you.
Examples of umbrella insurance benefits include protection from the following:
- Significant property damage. Your standard auto insurance liability limit may be exhausted if you are at fault in an auto accident where you destroy another vehicle and/or other property.
- Serious bodily injury liability. Your homeowner’s insurance liability limit may be insufficient to cover medical and other costs related to a guest falling off a balcony at your home, or being bitten by your dog.
- Landlord liability. A tenant might file an expensive suit over an injury sustained while renting your property.
Libel or slander. Lawsuits could result from something that you say or write about another person. - Malicious prosecution. You may file a suit against someone and in turn be sued for wrongfully, or maliciously, prosecuting that individual.
The right umbrella limits for you depend on where you live, your profession and your aversion to risk. Liability coverage in home and auto policies rarely exceed $500,000, yet 13% of personal injury liability judgements and settlements are $1 million or more, according to a report, citing data from Jury Verdict Research. The amount of coverage you choose should bear some relation to your net worth.
When trying to determine the right amount of coverage to carry, consider these items:
Total Assets: Setting your umbrella limit based on your total assets will give you more protection than basing it off of your net worth. Instead of matching your liability coverage to your net worth, these advisors recommend coverage equal to the value of your assets without regard for your debts (this could help you avoid selling your home to pay a judgment if your net worth is your home equity, for example). Applying this to the example above, then, you’d want at least $500,000 of liability insurance, because the assets total $500,000. You may need an umbrella policy if your insurer’s basic liability coverage limit is less than $500,000.
Future Income: But that’s not all. If someone sues you and gets a judgment that exceeds your liability coverage, your future earnings may also be on the line, and could be garnished up to 25 percent. To address this, consider multiplying your income by five and adding that amount to your asset total. If your total household earnings are $100,000 a year and you have $500,000 in assets to protect, you may want a $1 million policy. You’d almost certainly want umbrella coverage.
Collateral Damage: Another facet of this examination is the potential damage to others. If you’ve got two teens entering college, plan to retire soon, or are supporting aging relatives, a financial wipeout could be catastrophic and possibly permanent. That’s another indication you might need to expand your liability insurance with an umbrella policy. If you’re young, single, broke, renting and healthy, losing everything you own would be terrible, but you’d probably recover eventually.
Like any insurance, an umbrella policy should bring you some peace of mind. With any luck, you’ll never have a circumstance where you need to use the coverage. But bad things do happen, and just knowing it’s there is one way of knowing you’re prepared to deal with a tragedy or accident beyond your control — at least from a financial aspect.
Pogol, Gina. “Umbrella Insurance Policy: Because When it Rains, it Pours.” Inurance.com Quinstreet, Inc., February, 21 2017. Web. April 24, 2017.
Professional Liability Insurance
Does your business counsel or provide advice to other businesses? If so, you’ll likely want to purchase professional liability insurance commonly known as errors and omissions insurance.
Professional liability insurance is a type of liability coverage designed to protect professionals including but not limited to: accountants, attorneys, real estate brokers and consultants, against liability incurred as a result of errors and omissions in performing their professional services.
Some examples of what is covered under an E&O policy are:
- Documentation errors
- Verification mistakes
- Failing to protect clients’ property or data and/or misusing it
- Misrepresenting products or services
- Violating legal or state laws
- Breach of contracts, poor ethics, mistreating any aspect of the client or their business
- Exposing proprietary or confident company information
Professional liability insurance will pay the cost of legal defense against claims and payment of judgments against you, up to the limit of the policy. In general, coverage does not extend to non-financial losses or losses caused by intentional or dishonest acts. Other fees, such as licensing board penalties, may also be included. Policies will generally have a deductible ranging from $1,000 to $25,000. The amount of professional liability insurance you will need and how much it will cost depends upon the size of your business and the level of risk it poses.
You may be able to include professional liability coverage in a Commercial Package Policy (CPP) as an endorsement. Note, however, the professional liability coverage is not included in an in-home business policy or Business Owners Policy (BOP).
Cleary Community Outreach
Presented by Michael Regan
Cleary Insurance is a member of the National Association of Surety Bond Producers (NASBP), which is the national professional organization for agencies that have a specialty in surety bonding. We take pride in reaching out to contractors who may need assistance when obtaining surety bonding. Small, emerging, disadvantaged, minority, women owned, and service disabled are examples of contractors that may need assistance.
As part of the outreach, Mike Regan has been a presenter for surety bonding on numerous occasions including for the US Department of Transportation, The US Small Business Administration and at numerous trade organizations. Most recently, Mike was a presenter at Suffolk Constructions “access to capital” session of their Trades Partnership Program. This is a program they run for contractors who would qualify for one of the categories mentioned above and would like to do business with Suffolk Consruction.
The outreach is an annual eight week program and will include Mike’s return in 2017 as a presenter on surety bonding.
Click here to read the NASBP Pipeline article.