What Limit of Umbrella Liability Insurance Do I Need?
The reason this is such a difficult question to answer is because the answer can be different for every customer based on a number of variables, including what type of risk appetite an organization might have. Statistically speaking though, the odds of a non-property claim to exceed $3 million is very small and it’s almost unheard of to have a $10 million or more claim. We’ve counseled with some experts in the field and noted below are some possible guides to help answer this very important question.
- Look at your annual budget for the first point of reference. Ideally you’ll want the Umbrella to cover the annual budget until the annual budget exceeds $10 million. In other words, let’s say you have a $5 million annual budget. Assuming you have a $1 million base limit of liability a $4 million Umbrella liability policy would generally be recommended in this example.
If your budget exceeds $10 million, examine your various activities to determine if you have “hazardous” type activities that could create a larger liability. For example, evaluate what type of events your youth group is involved in (by the way, proper insurance doesn’t take the place of reasonable/proper risk management so consult your insurance agent when considering higher risk type activities); understand that larger groups typically present higher risks; transportation is always a higher risk and the more frequent the use or the longer the distances the higher the risk; the presence of a school or daycare.
What is Umbrella Liability Insurance?
Umbrella Liability Insurance provides your organization with additional liability coverage to help protect you against the potentially ruinous costs of claims. Significant assets can be at risk when they become the target of lawsuits. If the cost of a claim exceeds the limits of your underlying liability insurance, the Umbrella Insurance extends coverage for an additional layer of insurance, generally in increments of $1,000,000, to further protect the organization’s assets.
Umbrellas and Excess policies are important because they provide you with additional (higher) limits over your primary liability policies. Most of them provide you additional limits of insurance over the General Liability, the Automobile Liability, and the Employers’ Liability part of Workers’ Compensation Insurance. Some but not all companies will extend the Umbrella liability coverage over the sexual abuse liability and sometimes over the Directors & Officers liability. Umbrella’s are typically written on their own form and often times contain broader coverage than their underlying policies.
Reminder: Your Umbrella Liability policy limits should equal your annual budget (less your base limit of liability, in most cases that’s $1 million).