During a party at a hillside home, many guests were injured when the overcrowded deck collapsed. The medical costs quickly exceeded the host's liability coverage.
The danger from the uninsured and underinsured goes beyond auto accidents. Consider a child flying off a neighbor's trampoline and suffering a permanent brain injury requiring lifelong care. The expenses for medical treatment and care could amount to millions of dollars. But most homeowners have no more than $300,000 to $500,000 in liability coverage.
Without the additional protection, families can be forced to sacrifice their homes, their savings and investments, and their future income stream to pay damages. These dire consequences explain why agents ranked umbrella liability as the most serious problem of underinsurance. Fully 40 percent of agents gave it the top spot, more than for any other type of coverage.
Personal liability tends to be one of the most misunderstood and neglected categories of insurance. In addition to umbrella liability and uninsured/underinsured liability, two additional types of liability coverage bear mentioning:
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Employment Practices Liability for Domestic Staff72 Percent Said Likely Underinsured
The standard liability coverage in a homeowners or umbrella insurance policy does not cover lawsuits brought by domestic employees for wrongful employment practices. These practices include discrimination, sexual harassment, wrongful termination, and other claims. In many cases, disgruntled nannies or housekeepers file baseless suits, hoping the family will settle to avoid onerous legal expenses and possible damage to their reputation and career.
Adequate protection requires employment practices liability coverage, which may be available as a separate policy or as an optional endorsement to an umbrella policy. This coverage will pay for damage awards and legal fees to defend against even groundless suits.
Not-for-Profit Directors & Officers Liability65 Percent Say Likely Underinsured
Many high net worth individuals volunteer as board members of charitable organizations. While commendable, this behavior creates liability risk. Volunteer board members can be held liable for the actions or inactions of the charitable organization. The most common suits involve wrongful employment practices, such as discrimination, wrongful termination and sexual harassment. The organization may carry insurance to protect board members, but a limited budget typically prevents the purchase of a heavy duty insurance program. Furthermore, these types of suits are not covered by a basic personal umbrella liability policy.
To guard against this threat, volunteer board members should consider not-for-profit directors & officers insurance. This coverage is typically sold as an optional endorsement to an umbrella policy and might cost about $500 for $1 million in coverage.
