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How to Protect Client Portfolios From Excess Liability Claims

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What You Need to Know

  • Basic auto or home insurance policies’ liability limits may not fully cover the high costs of an accident or lawsuit.
  • Without proper insurance, those clients may be forced to liquidate investment assets to cover the excess.
  • Your clients may have made lifestyle purchases during the pandemic, like a boat or motor home, that require additional insurance.

High-net-worth clients are especially at risk from an unexpected source: personal liability claims. In response, advisors can build trust with their clients by helping them understand and protect against catastrophic liability losses.

An unexpected event — such as a boat or car accident, a guest injury on your property or a high-dollar jury award — can reduce a client’s personal wealth in one fell swoop.

Excess Liability Coverage

Your clients may have basic auto or home insurance, but these policies’ liability limits may not fully cover the high costs of an accident or lawsuit. For example, a standard homeowners policy may provide $100,000 to $500,000 in liability protection, but this limit can easily fall short in some cases. When a client lacks appropriate levels of insurance, an unexpected event can require the liquidation of investment assets to cover a judgment or settlement, as well as legal costs.

Fortunately, a personal excess liability policy, also known as an umbrella policy, can provide additional coverage that protects your client’s wealth. Excess liability coverage will kick in for a covered event when the underlying limit of a home, auto, or other policy is exhausted.

But not all excess liability policies are the same. Make sure your client works with a carrier that offers high enough limits to protect their wealth. Also, clients and advisors should carefully consider how legal costs for covered events will be paid under the policy.

Unexpected Events

An insurance agent or broker specializing in HNW clients can help identify and evaluate risks that your clients may not recognize. Consider these two examples:

  • Dog bite severely injures girl — In one Chubb claim, a client’s dog bit a young girl who was airlifted to a hospital and underwent surgery, resulting in the client’s excess liability policy paying $2 million for the girl’s treatment and recovery.
  • Authorized driver causes serious accident — In another Chubb claim, a client’s daughter loaned her car to a friend who drove recklessly and severely injured a passenger. The client’s excess liability policy covered an additional $5 million for the injured passenger beyond the limit of the primary auto policy.

Moreover, your clients may have taken on new risks during the COVID-19 pandemic that have not been evaluated for risk and insurance coverage.

For instance, because of limitations on travel and the need for social distancing during the pandemic, many successful families have purchased new lifestyle assets — such as a boat, motor home, vacation property or a new dog. While these purchases can bring immeasurable value to a family’s quality of life, they also carry new risks that may require additional insurance.

Actions Advisors Can Take

Recent Chubb research conducted in partnership with Oliver Wyman found that 85% of successful individuals believe their financial advisors should act as a “quarterback” for all of their financial needs, providing guidance not only on investments but also on addressing P&C risks. Yet only 28% of advisors help their clients identify these risks.

You can differentiate yourself and provide a new level of service by helping your clients protect against portfolio losses that might result from a liability claim. By highlighting the benefits of excess liability insurance, you’ll provide the holistic guidance clients are looking for.

Ask your clients if they work with an independent insurance broker or agent who specializes in P&C insurance. Also, we strongly recommend you partner with an agent or broker and bring them into conversations with your clients.


Ana Robic is division president, North America Personal Risk Services, Chubb. She can be reached at [email protected].