The Umbrella Insurance Application
The most important factor to analyze when considering the purchase of Umbrella insurance is the value of your assets. Many people don’t realize the extent of their net worth. You should consider the total value of your and your spouse’s savings, investments, retirement accounts, home equity, business value, personal property (jewelry, art, boats etc.) and income generating potential.
Add it all up.
Next, ask yourself what kinds of coverage for liability-causing activities might not be covered by primary/existing insurance policies.
Ask the agent for specific inclusions and exclusions, based on your current and existing insurance policies:
- What types of acts are covered under the policy?
- What types of allegations will they pay to defend?
- What acts are excluded under the policy?
- What types of claims will the insurance company refuse to indemnify (settle or pay the judgment)? What types of claims will they refuse to even defend?
- Are the defense fees the insurer pays deducted from your liability limits or are they in addition to your limit?
After you have determined the type of coverage you need, discussed the policy limits and deductibles and asked relevant questions concerning important provisions in the policy, you are ready to fill out the insurance application.
The information in the application is what the insurance company relies on when it decides whether to insure you. You must therefore read every question and answer it HONESTLY AND COMPLETELY. If the insurance company later learns that an answer was wrong or incomplete, it may be able to RESCIND or VOID the contract and DENY your claim.
For this reason, you must carefully read all policy application questions and answers very carefully. If you are unsure of the meaning of a question, ask the insurance company or agent and note any significant response on the application form.
Do not sign the application until you have completed the application and checked it again for accuracy. After you sign the application (usually under penalty of perjury), photocopy the application and keep the copy in your insurance binder or file.
Some types of insurance contracts contain an Incontestability Clause, which means that the insurance company cannot deny a claim based on a material misrepresentation on the application after the policy has been in effect for a specified number of years (usually two or three). Ask if the policy you are considering has such a clause.
READ your policy before you buy it.
If you find any misstatements or inaccuracies or you see something that you did not expect, call the insurance company or agent RIGHT AWAY and resolve the matter. Take notes on this conversation and save them in your insurance notebook or file. Do not wait until you have a claim because by then it may be too late. It is better to resolve the issue NOW than to learn later on that you are not covered.