Frees Advice: Other Insurance

What is a Liability Umbrella?

Insurance has some of the least exciting names for things. It isn’t like Red Bull or Mountain Dew. We have terms like stacking and unstacking. Boring. We have Marine which means we also have Inland Marine. Weird. We have Tort, not the delicious one, and then there is the “umbrella.”

Insurance can be divided into two basic parts; insuring “stuff” and liability. “Stuff” includes things like houses, cars, motorcycles, and boats. All of these things we own and we know whether we could afford a loss if one occurs. Have an old car? No need to carry collision coverage if you could afford to fix or replace the car without money from the insurance company. But what about liability?

Liability is what you can do to someone else. Unlike property, where you know your own ability to absorb a loss, you never know what you are going to do to someone, you never know to whom you are going to do it, and you never know how they are going to respond to being injured or having their property damaged. So, liability is the protection you can buy to protect yourself for all of these unknowns. But how much liability is enough?

The maximum coverage you can buy under most home and auto policies is $500,000. That sounds like a lot. It isn’t. As I write this letter, we have two liability claims against our insureds for auto accidents. One has a demand of $2.3 million and the other will have a demand of $2 million.Is this unusual? For the first 32 years of my time in the industry, we had two umbrella claims, one which paid $4.5 million. In the past 5 years, we have three.

What can you do to obtain more coverage than the $500,000 afforded by your home or auto? Buy and umbrella. No, not the kind for rain. This policy is called and umbrella because it is an additional policy designed to pay after your home, auto, boat, motor home, or motorcycle policies have paid the $500,000 limit. Why is it called an umbrella? Frankly, I don’t know. It is a silly name for a very important policy. Think of it as excess coverage through a policy that expands or contracts based on all of your liability exposures.

How much should you buy? It is a very easy decision. Buy what you can afford with the understanding that you could buy $1 million of coverage and need $2 million. Have $2 million and hit a school bus and that will not be enough. Raise all of your deductibles on the auto and home policies to save money and spend that savings on an umbrella. You might not like to have to pay a $1000 deductible for a home loss, but a $1 million umbrella for a house, two cars, and two mature drivers costs about $240 a year. Already have an umbrella? Think about increasing it since each additional $1 million of coverage costs about $200 annually.

You should discuss this with your insurance professional. Need an insurance professional? Call us at 610-933-4950.

Rental Cars: Buy The Insurance?

This is one of our most common inquiries, but like with most questions in insurance, there is no simple answer. Renting a car on vacation can be one of the most confusing issues because of the exposures, rental contracts, and driving “territories.” The simplest answer is to buy the coverage. Not satisfied with that? Read on.

Let’s start with the easiest question first. Do I need to buy coverage if I travel outside the United States or Canada? The answer is ALWAYS yes. Automobile insurance policies in the United States have a territorial limitation that provides coverage ONLY in the US and Canada. Going to Australia? Buy the coverage. Going to Zambia? Buy the coverage. (Get it? A to Z. Who says insurance isn’t funny.)

Now, you may be asking, what do I mean by coverage? There are two types of coverage that you should always consider. The first is liability. This protects other people if you injure them and property if you damage it. Your car insurance MAY extend this coverage, but you may not want to use your car insurance, especially if you are traveling with another family or other people. Do you want to expose your car insurance to your friend’s accident? Probably not.

In addition to liability, there is the question of coverage for the rental car. Your car insurance MAY extend coverage to a rental, but ONLY if you have collision and other than collision coverage on your policy. These protect the car if it is damaged and you are responsible, or if you are involved in a hit and run. It would also pay if you broke a windshield or hit a deer.   If your rental gets backed into in a parking lot and the tail lense is broken and it costs $450 and you have a $500 deductible, you are paying for the loss and your deductible would apply to the rental. The coverage that the rental car agency will sell you is call Loss Damage Waiver, LDW, or Collision Damage Waiver, CDW.

I mentioned the car rental contract. Typically, this contract is between YOU and the Rental Car Company. Some contracts state that they will not deal with your car insurance since the contract is between you and them. They may place a hold on your credit card for a deductible if you do not purchase their coverage. You would be required to pay them directly and then sort it out with your insurance company in order to be reimbursed.
Why should you buy the LCD/CDW? Like with the liability coverage, do you want to expose your coverage for something your friend did while driving? A better way to look at this is to think of buying this coverage as “Trip Insurance.” After you are done buying airline tickets, paying for a hotel or condo rental, why would you want to spend your time on the phone with the insurance company sorting out a claim instead of laying by the pool, or on the beach? Buying the coverage on the car allows you to return the car to them, NO questions asked.

If that isn’t reason enough to consider buying the coverage, there are two other exposures that your car insurance will NEVER cover. The first is Loss of Use. If you have rented a convertible Mustang in Florida and are paying $50.00 a day for the experience, the rental car company will not be pleased if the car gets damaged and requires 20 days to be repaired. They are going to ask that YOU pay them the $1,000 they lost for NOT being able to rent that car.

The other issue is a relatively new concept, and it is rather complex, but there is NO coverage for “Diminished Value.” When rental car companies buy cars, they know that they will be able to sell them for a certain amount when they are done with them. If that car is in an accident, they cannot sell it for as much, so they can assess you for the diminished value of the car. There are only a limited number of states where this exists, but is is an exposure for which your car insurance will not respond.

So, in the end, what do I recommend? Buy the coverage. If not, be prepared to deal with a potential mess.

Where’s the Party?

Our world seems to be getting increasingly complex and significantly more litigious. In the old days, you would just invite people to the wedding, birthday party, or graduation celebration without demands from the venue for coverage and without the fear of being sued by someone who drank too much. Those days are gone and in their place, the insurance industry has created a Special Event policy.

This new coverage is designed to handle all sorts of issues surrounding renting a hall, serving liquor, and adding venues to the coverage as a condition of use. It is a relatively inexpensive way to handle all of the unique demands being imposed. Did some of these coverages exist before under your home policy? Yes, but there was no way to add a venue as an additional insured and most venues are requiring $1 million of liability coverage. In addition, this extra coverage isolates any potential claim to a policy designed for the exposure and it prevents having to submit a loss to your homeowners or renters coverage which might impact your premium.

Questions about this? Talk to you insurance professional. Don’y have an insurance professional? Call us at 610-933-4950.

Insuring Valentine’s Gifts

Happy Valentine’s Day! For those of you who are giving or receiving the gift of jewelry, make sure you consider insuring those items. In the event of a loss you will have peace of mind knowing your beloved items are adequately covered. Under your homeowners policy, this endorsement would cover repairs of like kind and quality. If you have a very special piece you should also look into a separate valuable items policy for specific pieces. Other than jewelry, valuable items coverage may be purchased for the following items:

  • Silverware, china and crystal
  • Antiques
  • Fine Art
  • Stamp and coin collections
  • Bicycles
  • Trophies
  • Sports equipment (archery, camping, fishing, skiing)
  • Wedding gifts
  • Cameras
  • Computers
  • Musical instruments
  • Golf Equipment
  • Furs
  • Guns

If you think this coverage is something you may want or need, please contact us to discuss coverage options.

Hurricane Matthew

Hurricane Matthew has come and gone while leaving millions without power and a long cleanup ahead. Its effects can still be seen, and people are still trying to recover from the damage it caused. Matthew made its way through the Bahamas as a Category 4 hurricane, then continued its towards the eastern coast of Florida. While slowly losing momentum, Hurricane Matthew battered the east coast while going from a severe Category 4 storm to a significant Category 1 hurricane by the time it reached North Carolina.


It’s important to understand the magnitude of these storms and the destruction they can cause. The Saffir-Simpson Scale rates hurricanes based on their severity on a 1 to 5 scale. This Hurricane Intensity Scale effectively demonstrates the wind damage associated with each hurricane category.


Category 1 (74-95 MPH)

Very dangerous winds will produce some damage: Well-constructed frame homes could have damage to roof, shingles, vinyl siding and gutters. Large branches of trees will snap and shallowly rooted trees may be toppled. Extensive damage to power lines and poles likely will result in power outages that could last a few to several days.


Category 2 (96-110 MPH)

Extremely dangerous winds will cause extensive damage: Well-constructed frame homes could sustain major roof and siding damage. Many shallowly rooted trees will be snapped or uprooted and block numerous roads. Near-total power loss is expected with outages that could last from several days to weeks.


Category 3 (111-129 MPH)

Devastating damage will occur: Well-built framed homes may incur major damage or removal of roof decking and gable ends. Many trees will be snapped or uprooted, blocking numerous roads. Electricity and water will be unavailable for several days to weeks after the storm passes.


Category 4 (130-156 MPH)

Catastrophic damage will occur: Well-built framed homes can sustain severe damage with loss of most of the roof structure and/or some exterior walls. Most trees will be snapped or uprooted and power poles downed. Fallen trees and power poles will isolate residential areas. Power outages will last weeks to possibly months. Most of the area will be uninhabitable for weeks or months.


Category 5 (157+ MPH)

Catastrophic damage will occur: A high percentage of framed homes will be destroyed, with total roof failure and wall collapse. Fallen trees and power poles will isolate residential areas. Power outages will last for weeks to possibly months. Most of the area will be uninhabitable for weeks or months.


Many people underestimate the strength and power of hurricanes and even storms in general. It is important you take necessary precautions to prepare for a severe storm. While this year’s hurricane season is shortly coming to an end, you still want to make sure you are prepared in the chance one comes your way.

Flood Insurance Facts

flood, flood insurance

If you live in a high-risk flooding area, having flood insurance can be one of the most valuable purchases you’ll ever make. This year, the South has received massive amounts of flooding resulting in devastating losses of homes and businesses. Floods are the most common natural disaster in the United States with an average NFIP claim of $42,000. In the past five years, all fifty states have experienced floods. There are a few important facts to know about flood insurance in today’s world as an insurance agent and as a client.

National Flood Insurance Program (NFIP) also doesn’t provide coverage for finished basements, personal contents in a basement, and additional living expenses; however, it does provide coverage for footings, foundations, posts, pilings, piers, other foundation systems, stairways, furnaces, hot water heaters, electrical junction, circuit breaker boxes, electrical outlets, and switches. New private products may assist a flood insurance policy in acting more like a homeowner’s policy, such as providing coverage for finished basements and additional living expenses.