Don’t Let Clients Count on Luck When It Comes to Personal Umbrella Purchases

By the time you finish reading this sentence, two new law suits will be filed in U.S. courts.

We live in an extremely litigious society. There is no other way to put it. The United States has more lawyers per capita than any other country. As our schools produce more lawyers, these lawyers produce more lawsuits. In 2011, it is estimated that more than 15 million lawsuits will be filed in this country. That’s one lawsuit every two seconds or one lawsuit for every 12 adult Americans.

The origins of the lawsuits will differ, but many will result from incidents and accidents that involve your clients. These lawsuits will result in over $40 billion in awards. Ask yourself: Have you done your best to prepare and protect your clients and their personal assets?

As insurance professionals, our role is to educate our clients on risk and the financial implications it can have on them. One area where we fall very short is presenting personal umbrella and excess liability coverage to all our clients. A personal umbrella provides an additional layer of liability above and beyond those offered by the underlying auto, home, boat, and recreational vehicle policies.

My experience has shown me one thing about these products – umbrellas are sold, not bought. Most people will not choose to buy a personal umbrella. They assume nothing bad will happen to them and if it does, their auto and home limits will be sufficient. In other words, they feel lucky. As their risk manager, luck cannot be part of the plan.

The truth is bad things happen to good risks. Good drivers are involved in auto accidents. Accidents occur in responsible homes. Life happens. Here’s a small sampling of what will happen this year:

• There will be more than six million car accidents, causing over three million injuries. Two million of these injuries will be permanent.
• Teenage drivers, who account for less than 5 percent of all drivers, will be involved in nearly 10 percent of all fatal car accidents.
• Boating accidents will injure more than 3,000 people and claim more than 700 lives.
• Close to five million people will be bitten by dogs. Most will be children and over half will be bitten in the face. Dog bite losses will exceed $1 billion and homeowners insurance will pay just $300 million.
• Nearly 100,000 people will be injured on trampolines. Again, most are children under the age of 15.

Just these few examples add up to nearly 16 million incidents this year. When you think of it in those terms, it is a wonder that we only have 15 million lawsuits. With so much at risk, why don’t more people buy personal umbrella coverage? Hint: umbrellas are sold, not bought.

Isn’t It Ironic?

There is an ironic trend taking place in the personal umbrella market these days. As the economic downturn continues to impact our country, more and more people are viewing personal umbrellas as an unnecessary or luxury expense. Policyholder requests to cancel umbrellas or reduce limits are increasing. The tragedy in this thinking is threefold.

First, personal umbrellas are inexpensive. Dollar for dollar, it’s one of the cheapest insurance products out there.

Second, when the economy drops, lawsuits and litigation go up. Likewise, a poor economy means more uninsured and underinsured drivers on the road. An estimated 20 percent of the drivers on the road today are uninsured. A much larger number have reduced their auto liability limits to the state minimum, making them grossly underinsured in the event of a large loss. So, at a time when the need for protection is the greatest, consumers are voluntarily choosing to make themselves more vulnerable. Tip: Umbrellas are not bought, they must be sold.

Got UM?

Let’s focus on the most responsible and luckiest client in your agency. He has gotten rid of the swimming pool, boat, trampoline, snowmobile, and family pet. She never drives over the speed limit, always wears her seat belt, never talks on her cell phone or texts while driving, and would never drive within eight hours of taking cold medicine. Despite all these precautions, there is still one risk insureds cannot avoid – everyone with whom they come in contact.

We know there are a great number of drivers who are improperly insured. If your client or family member is seriously injured in a car accident involving one of these drivers, who pays for the medical bills and long-term care? Perhaps your client will win a settlement in one of the 15 million lawsuits making their way through our court system, but, as the insurance agent, is this the answer you want to give? At the lowest point in your client’s life, dealing with doctors, hospitals, and rehab centers, he/she now has to find a lawyer to file a lawsuit against an uninsured driver.

A plaintiff attorney once told me that a personal umbrella without uninsured and underinsured motorist coverage is not worth the paper it’s printed on. Make sure your clients understand that an umbrella is not only there to make sure the other person is taken care of after an accident, but to also ensure the adequate care of themselves and their loved ones. Last time: Sold, not bought.

No Excuses

Finding umbrella coverage for the hard to place risk is not as hard as it once was. You can easily find mono-line umbrella coverage for clients with multiple underlying carriers. Umbrella coverage is available for drivers with serious offenses such as driving under the influence and others, teenage drivers, recreational vehicles, and other unusual exposures. Personal umbrella coverage can be found on an admitted and nonadmitted basis. If you are having trouble finding coverage for your client, call your wholesale partner to see what options they can provide. It’s a small percentage of people who cannot obtain some umbrella or excess liability coverage.

In conclusion, the question isn’t whether your clients should buy a personal umbrella, but rather, will you sell them one?

Topics Lawsuits Auto