Under My Umbrella

An overcoat and galoshes keep your body from the raindrops, but it’s the umbrella that keeps you from getting soaked. The same can be said of an umbrella insurance policy. It can keep your high net worth (HNW) clients from getting financially soaked.

As with any insured, a HNW client will have separate policies for their individual items: home, auto, watercraft. However, these policies will typically cover the actual items.

The umbrella policy is not adding additional coverage for contents or building values, says Joshua Elo, Assistant Vice-president of Ovation with Aviva Canada. “The umbrella cascades and protects everything underneath it—from a liability perspective.”

What slides underneath that umbrella will vary from HNW to HNW individual. The umbrella is designed to sit over the other insurance policies the client has. That’s where a broker conversation is necessary. For example, an auto policy could be brought in under the umbrella, along with a watercraft policy. The policy must be added in and brought in through the advice of the broker and the HNW individual as they negotiate insurance coverages, says Elo.

“You might have 30 different policies—especially if you’re a HNW customer—that we, as an insurance company, don’t know about,” says Elo. “Your broker needs to make sure they’re all included and covered.”

Elo says this is an important policy and product because it expands the client’s protections. “Right now, in today’s world, we really see an increase in exposures.”

And that exposure won’t matter if your client is culpable or not. “Sometimes you can be brought into litigation or into circumstances where you have no negligence, but you’ll still be brought into it from a liability standpoint,” says Elo. “So, an umbrella, for instance, would cover your legal defence costs and provide some relief for time spent off work or involved in the legal process.”

But just like a client’s actual umbrella, their umbrella policy goes where they go, too. This policy covers your HNW client’s actions worldwide. For example, if your client is travelling in Europe, they’ll likely not be driving their personal vehicle. They’ll need a rental car and purchased coverage in the country. But that level of protection is basic, says Elo. “[The umbrella] will slide over and cover the liability for any bodily injury and/or property damage the individual may cause, pending the specific laws in that country.”

An umbrella policy can also provide additional coverage that might not be found in other insurance products. One is publicity consultant insurance. “Reputationally, if there’s any damage done because you’re involved in a lawsuit, for instance, there’s some coverage provided,” says Elo.

While your HNW client may understand the importance of the umbrella policy, they’ll likely wonder what additional expense this policy is going to cost them. According to Elo, an umbrella policy provides real value for that additional protection. “It’s, comparatively, very inexpensive,” he says. “It’s a small fraction of what your underlying premiums are. It can provide $10 million, $15 million, $100 million in extra protection depending on what you need.”