Protecting your assets, business and otherwise Why businesses and families should consider umbrella liability insurance

By Andrew Weeks

Insurance professionals say now might be a good time to consider an umbrella liability policy if a business or person doesn’t already have one in place.

An umbrella policy helps protect a person or business’s assets, and in this “sue-happy world,” as one insurance provider proclaimed, it only makes sense to have it in one’s toolbox.

DJ Colter, in what he calls the old days some 18 years ago when he started in the industry, said back then he’d ask his clients if they had enough liability to cover their home and autos.

“In the old days that $100,000 liability was more than enough,” he said. “Well, those days are gone. Now what I tell people is here we have Minnesota, nice people. North Dakota, nice. People are nice in the Midwest, right? But we’re living in a sue-happy culture and it’s not your neighbor that you have to worry about. … It’s the hospitals and the insurance companies.”

Colter, who owns DJ Colter Agency Inc. of American Family Insurance in Fargo, has seen the scary side of someone not having an umbrella policy.

A few years ago he represented a couple who had been involved in an automobile accident. Another person in the crash was injured and sent to the hospital. In the end, that hospital bill totaled some $150,000. Guess who was liable for the bill? The couple had enough insurance to cover their home, and Colter wrote a check for $100,000, but the remaining $50,000 were garnished from both the husband and wife’s paychecks, a lien was put on their assets — their home, autos, their retirement accounts.

“It was terrible,” Colter said. “I never want to see that again.”

In a nutshell, umbrella insurance covers losses beyond what’s covered by other insurance policies. Colter said umbrella liability insurance typically is sold in million-dollar increments, beginning at $1 million, and can be surprisingly inexpensive for the amount of coverage it provides. It also can provide peace of mind to the business owner.

As an example, an employee gets in an auto accident while making a delivery for work. “Your employee is at fault and the accident costs from property damage and bodily injury damage exceeds the liability limit on your commercial auto insurance policy,” reads a May 17, 2021, article by Forbes. “Without a commercial umbrella policy, you would need to pay for those expenses out of your business funds, putting your business at risk.”

Commercial liability insurance is an extra layer of protection for that business.

“Umbrella insurance is like backup insurance for your other insurance policies,” according to an Insider story dated Oct. 1, 2021. “The extra insurance is common for people who are concerned that they may be sued for any reason that could threaten their net worth. It covers liability for injuries, libel, vandalism, slander, invasion of privacy and other scenarios.

Marilyn Ternes, vice president of the Bismarck branch of EMC Insurance Companies, said she believes there is more demand for umbrella policies these days than in the past.

“I would say there’s probably more demand because businesses want to protect their assets more with today’s legal environment the way it is,” she said. “The demand has always been there, but it is increasing.”

The best way to find out about umbrella policies, and what might be right for a business or family, is to talk with a professional insurance agent.

“An umbrella policy is a layer above your primary policy, liability and auto policy,” Ternes said. “It could be over those two lines of business. We work strictly through the independent agency system. It’s a conversation you have with your professional producer, who you’re working with, and then the company would take a look at it and underwrite it based on exposures, whether they would offer an umbrella and what limits they would be willing to offer.”

She said the cost of umbrella liability is based on the limit a person or business selects as well as their primary exposures. The number of employees of a business also may affect the cost.

“There could be a correlation there, yes,” Ternes said.

The question remains: Who should get umbrella liability insurance?

According to Colter, everybody with assets.

He said it is always better to have it in a person’s toolbox and never have to use it than to one day need it only to find it missing.

“Umbrella policies are really smart to have,” he said. “I advise every single person out there to have one. … An umbrella gives you that extra layer of protection.”