Top 3 Reasons Why Requiring Renters Insurance in California is a Must

Name: Alta Vista Insurance Agency
Address: 2585 Pio Pico Dr Suite 100, Carlsbad, CA, 92008
Telephone: 888-724-2124

Posted on April 23, 2021May 6, 2021 by Seth Arruda

What is Renters Insurance?

Renters insurance is a type of policy designed for a property you are renting that provides protection in the event of a sudden or accidental occurrence known as a covered peril. These policies protect your tenants in the event of a loss and include three key benefits: coverage for the person, their belongings and stuff, and additional living expenses. The coverage in the policy is referred to as personal liability, personal property, and loss of use.

In California, not everything is covered under renters insurance, so we’ll show you how each plan can be tailored accordingly to fit your tenant’s lifestyle.

Here’s a great resource you can provide to your tenants to educate them about the importance of renters insurance.

Renters Insurance Flyer

1. Does Renters Insurance Protect Landlords in California?

With renters insurance, landlords can protect themselves and their business against liability from tenant’s negligence. It can also protect you from additional costs due to natural disasters or other occurrences. When your tenants carry renters insurance, they protect themselves and it can add an additional layer of protection which can lead to fewer claims filed.

2. What Does Renters Insurance Cover?

We talked about the three key coverages that renters insurance includes: personal property, liability, and additional living expenses. Personal property will cover your contents and belongings inside the property from a covered peril. Things like clothing, furniture, appliances owned by the tenant, and electronics up to the limits of the policy. In California, a good recommendation is including replacement cost coverage for personal property. This provides full replacement for your tenants’ contents and belongings. Without replacements cost, personal property would be covered on an “actual cash value” basis, which could lead to tenant complaints. Liability is the second most important coverage on a renters policy and is overlooked in most cases. In the event of an accident like a slip and fall or personal injury matter like slander liability coverage will pay for claims that arise if a tenant is found responsible or liable for the injuries. It can also cover accidental damage to someone else’s property caused by a tenant.

This can help landlords and property owners reduce claims to their commercial property insurance and reduce out of pocket expense to their business. Another great reason to require renters insurance from your tenants.

The third coverage is loss of use. This will cover any additional living expenses for your tenant if their unit is damaged and needs repair. Things like, a stay at a hotel, or the cost to sign a temporary lease while the repairs are being completed. In California, it can also cover additional living expenses if your tenants are in a mandatory evacuation zone due to a catastrophic wildfire.

Fire

Fires are a common peril and can happen due to many different reasons. Whether it’s a kitchen fire, a faulty wire, neighbors negligence, or even a wildfire the damage that is caused can devastate a home or apartment building. Some renters insurance plans will cover fires if your tenant is negligible, like if they forgot to blow out a candle or left the stove on. Between the fire and smoke damage your building could cost more to repair than you think.

Water Damage

Water claims are the number one cause of loss in California and a huge pain point for landlords, especially when you own a building with multiple stories or units that share walls with each other. If a pipe bursts behind the walls it can cause major damage to the building and the interior, like your tenants belongings or furniture. Your landlord insurance covers your structure from water damage that is sudden or accidental and renters insurance covers your tenants “stuff” inside their unit.

Earthquakes and Floods

In California earthquakes and floods are catastrophic perils that require separate policies. When we say flood, we’re talking about outside water due to storm surge or rising water, like a tsunami. Earthquakes and seismic activity can cause total losses to buildings and force tenants out of their homes without a place to live. Tenants can also purchase coverage to protect themselves from these natural disasters separate from their standard renters policy. Your landlord insurance will cover your building but it will not cover any property owned by the tenant. That is why renters insurance is a must for your tenants and their policy will cover their belongings and in most cases replace them. Renters insurance with these additions gives landlords and tenants peace of mind that they can recover from a large natural disaster, like an earthquake or flood.

Theft

Having a safe home environment is important to your tenants. Living in an area with security is an important factor when choosing a place to rent. Proper basic protective devices like deadbolts, locks on windows, and even burglar alarms can deter break ins and theft which can reduce damage to the building and filing claims. In the event of a theft, renters insurance can help your tenants replace the items that were stolen. Make sure your tenants document the loss with the proper authorities, that way the renter’s insurance company will pay claims for theft to their property. Tenants can also purchase special coverage for valuable items like jewelry, artwork, guns, and antiques.

Lawsuits

Tenants can be sued for a number of reasons due to their own negligence. A slip and fall accident by a guest or if a tenant is responsible for damaging someone else’s property can lead to liability claims that can be costly and stressful. Requiring renters insurance for your tenants in California can mitigate claims for the landlord if their tenants are responsible for damages or if guests are injured and seeking payment for their pain and suffering.

3. How Renters Insurance Protects Landlords

Rising Cost of Insurance

I think we’ve made good case for making renters insurance a requirement for tenants. It offers many benefits to renters to help them protect themselves while giving landlords another tool to protect their real estate investment. When landlords file claims it can lead to higher insurance premiums and in some cases your policy can be non-renewed if there is a frequency of multiple claims. Requiring tenants to provide renters insurance to protect themselves can reduce your exposure to claims and prevent rising insurance costs.

When landlords require renters insurance from their tenants, it creates an additional layer of protection against liability and additional fees due to catastrophic natural disasters, like wildfires in California, and sudden or accidental occurrences.

Managing risk exposures while reducing out of pocket expenses is very important when reviewing your real estate investment portfolio. If you own an investment property you should be working with an agent that specializes in helping landlords and real estate investors stay informed about potential exposures to their business and protect their real estate investments. Hiring a risk manager like Alta Vista Insurance is a sound business strategy to help you be financially protected, build wealth, and achieve financial freedom.

To book an appointment to talk about your investment property click the link here and let us help you create a plan to protect your real estate portfolio.

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The Morgan and Seth Podcast Special Episode with Carlsbad Tax Services

Posted on February 19, 2021February 22, 2021 by Seth Arruda

How To Keep Your Assets In Your Pockets

Morgan is out the studio. In this episode, my agent, Mark Lamb joins me with Edward Hull from Carlsbad Tax Services, a local tax firm in Carlsbad, California.

We dive into some of President, Joe Biden’s new proposed tax plans and a few different tax strategies that business owners, property owners, and high income earners can take advantage of to keep more money in their pockets.

This is an episode you don’t want to miss!

For the latest up to date tax information contact Carlsbad Tax services and click the button below.

Edward Hull

760-TAX-7000

Website

Carlsbad Tax

To schedule an appointment to discuss your insurance portfolio or hire us as your personal risk manager contact us to schedule an appointment below.

Alta Vista Insurance

888-724-2124

Alta Vista Insurance

The Morgan and Seth Podcast Episode 3

Posted on February 19, 2021February 19, 2021 by Seth Arruda

Morgan and Seth are talking investment properties! In this episode they talk about getting into real estate investing, the advantages of buying a multi-family property as a smart first choice, and the best way to insure these types of real estate assets.

Whether you’re a first time homebuyer or real estate investor, it’s important to understand how to be financially protected. Click the video above and watch this episode!

To get a quote for your investment property or if you have a portfolio of properties and need an agent that understands how to properly protect those types of real estate assets in California. Click below and schedule a consultation to talk about making a plan.

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The Morgan and Seth Podcast Episode 3 Watch on Youtube and Subscribe!

Morgan and Seth Podcast Episode 2

Posted on February 2, 2021February 22, 2021 by Seth Arruda

Episode 2

Morgan and Seth talk about the crazy week the stock market experienced with the GameStop short squeeze, retail investors and the market manipulation, the real estate market in Southern California and how to protect those assets and why real estate continues to be a healthy and strong investment strategy.

Don’t miss this episode and make sure you like, comment, and subscribe because we love doing this!

Morgan and Seth Podcast Episode 1

Posted on February 2, 2021February 2, 2021 by Seth Arruda

Episode 1

We started a podcast! This is not your regular insurance podcast.

Since we’re in the business of protecting our client’s real estate assets, we thought it would be valuable to talk about real estate as a primary investment strategy, how to build wealth through real estate, and the best way to protect those assets.

We also talk about current events and how they relate to investing and talk to subject matter experts in the industry to hear their stories and give us some guidance on best practices so you can be financially protected, build wealth, and live your best life. We also have some fun along the way!

Check it out! Time for the call to action! Like, comment, subscribe!

How California Homeowners Protect Their Real Estate Assets

Posted on January 28, 2021February 2, 2021 by Seth Arruda

I’m embarking on a new journey this year. Over the last thirteen years I’ve helped homeowners, new home buyers, and real estate investors in California protect their lifestyles and stay out of harms way so they can keep their assets in their pockets.

Very early on I saw the importance of being a problem solver and educating my clients so they could make the right decisions about their insurance protection. It sounds sexy, but it’s not. In fact, most people when you say the word “insurance” they immediately check out and look for the nearest exit.

WHY? I get it. Insurance is boring. Most consumers have no interest in it, until something happens in their life that changes their perception of what insurance actually does and the value it brings.

Insurance is a great tool and when used properly it can create a strong foundation to protect your income, your family, and your health.

I have said before,

the foundation to building wealth starts with financial protection. Understanding how to protect what you already have is one of the primary concepts to achieve financial freedom.

Many of these ideas have to do with the proper mindset. Mindset is everything. Without the right mindset you end up “running for the hills” when someone talks about insurance.

This is where the industry and many of my peers underdeliver. They constantly focus on price and the cost of insurance and overlook the importance of the proper protection. They do consumers a huge disservice by focusing so much of their time and resources on lowering the cost to squeeze every dollar out of the policy that it loses its value. And when the time comes when you need it the most the coverage doesn’t protect your lifestyle.

That is my goal as a personal risk manager. I want to change your mindset and the way you look at insurance. I want to invite you into a story where all your assets are protected, you have peace of mind, and you have the proper plan to achieve financial freedom.

Starting with a plan to be financially protected is the part of the story where we begin our journey. Insurance agents play an important role in guiding their clients in the right direction so they can make educated decisions about the proper protection they desire. That is very valuable to consumers seeking to protect their assets and their real estate investments.

In California, having an insurance agent that works closely with your real estate agent, CPA, and CFP creates a healthy ecosystem of “subject matter experts” that provide holistic solutions to their client’s problems.

Want to learn the benefits of adding a personal risk manager to your team?

Book an Appointment

https://outlook.office365.com/owa/calendar/SethArruda@aviains.com/bookings/

And as your needs change they play an intricate role guiding you through different stages of life making sure you stay on the right path to building wealth through real estate.

No matter where you are on your journey through life it’s always best practice to educate yourself on the best way to protect yourself, your family, your income, and your health and well being. You don’t need a million dollars in the bank to start learning how to be financially protected and build wealth.

So let’s start making insurance exciting! Well, maybe not. How about we start with changing the mindset when it comes to insurance. This year I want to lay a foundation starting with some basic strategies that you can implement right now to help you create a plan for you and your family.

Whether you’re buying your first home in California or adding another investment property to your portfolio, this information will help you understand exactly how to protect your lifestyle.

Personal Insurance Protecting Your Home

I’m going to start with some basic tips on how to help you get the best value out of your homeowners insurance in California. These are benefits you can include if you own a home or you’re a first time home buyer!

Make sure your home in California is insured to value and your policy has extended dwelling replacement coverage. Replacement cost is a MUST. Your home has to be insured up to the replacement cost of the structure. How much would it cost to rebuild? That’s replacement cost or insurance to value. I recommend a minimum of 150% extended dwelling replacement. That will come into play if the cost of materials increase or labor costs increase after a covered peril.
Loss of Use. If you have a claim and you cannot live in your home while the repairs are being completed, you need additional living expense coverage. If you have a total loss from a fire you could be displaced from your home up to 1-2 years. This is why having adequate loss of use limits for your lifestyle are critical. Most people overlook this coverage and most agents will reduce this type of coverage to lower the rate. Purchase the maximum amount of loss of use that is available from your insurance company. In California, you can activate this coverage if your home is in a mandatory evacuation zone. Lodging, food, gas, and transportation costs can be covered under additional living expenses.
Liability for your residence premises. If you’re sued due to negligence this will keep your assets in your pockets. In some cases, this coverage can be activated for personal injury as well. Remember, you don’t have to be a millionaire to be sued like one. If you live in California, your property is one of your most valuable assets. You should purchase at least $500,000 in liability on your homeowners policy. Some insurance companies are offering up to $1 Million limits.
PRO TIP: I would also purchase a personal umbrella policy. This is a separate policy you can purchase that provides an additional layer of protection for your assets. It will cover your home, autos, toys, and rental properties and provide you with legal defense in case of a large lawsuit.

Get a quote for your home today

Go to https://www.altavistainsurance.com/compare-quotes.html?t=Home

Some of my peers say insurance is like defense and if you played sports defense was never very glamourous. But, a good defensive strategy always wins championships. That’s how I want you to start thinking about your insurance protection. As a defensive strategy to help you win so you can live your best life.

Fourth of July Festivities and the Ultimate Burger

Posted on July 1, 2020January 12, 2021 by Seth Arruda

Summer holidays like the fourth of July are American made for celebrating our freedom and grilling with family and friends. I know this year’s fourth of July seems overshadowed by the current state of affairs, but I still believe this is the greatest country on Earth and we all have the right to stand up for what we believe in.

“Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.”

-Barack Obama

No one says America like the fictitious character from NBC’s hit show, Parks and Recreation, Ron Swanson. He’s become a cultural icon and a satirical metaphor for a libertarian and has some classic “one-liners”. Here, Ron show us his Ultimate American burger recipe in perfect Ron Swanson fashion.

“Turkey can never beat cow, Chris.”

Grilling in the summer is a pastime for many that brings us together. The smell of charcoal and sunscreen bring back memories spending long summer days at the beach enjoying a cheeseburger on a white bun with a little bit of ketchup. And a hint of sand.

For those of us firing up the grille this fourth of July looking for a simple recipe for a backyard burger, look no further. Gourmet burgers serve their purpose, but nothing beats a good hamburger cooked on a charcoal grill in someone’s backyard on the fourth of July. A hamburger on a bun with ketchup and mustard gets my vote everyday.

Here’s a recipe from actor Nick Offerman that will save you time preparing but still have you looking like a grille master.

You can read the full article in Entertainment News here.

Even if Offerman’s not a Swanson-level specialist on red meat, he does have a taste for burgers. Here, he shares his own tips for a burger that’ll put a Quarter Pounder to shame.

1. What’s Your Beef?

“You start with getting the best ground beef you can, with a nice lean-to-fat ratio,” Offerman says. “The lean is delicious, but the fat is an important binder.” Mix in a few raw eggs to help the patties stick together.

2. Don’t Mince Words

Mince garlic instead! Sauté the garlic and some chopped onion in oil, and then mix that into the ground beef. Add a little salt and pepper, and maybe some grated Parmesan cheese or Gruyère “if [you’re] feeling hedonistic.”

3. Get Grilled

“Keep the patties thick, and grill medium-rare over charcoal. “I don’t think I’ve ever used a grill fueled by gas,” he says. “There’s something about the primitive nature of charcoal, of real fire.”

4. Top It Off

“Depending on how gluttonous I’m feeling, the max I’ll go with is Gruyère or cheddar on the burger and bacon and a fried egg,” Offerman says. “That’s if I’m planning to go chop down a tree that day.”

However you celebrate your Independence Day, we hope you have a safe and happy fourth of July.

Coronavirus Insurance Relief

Posted on April 17, 2020January 12, 2021 by Seth Arruda

California Department of Insurance Orders All Insurance Companies to Offer Relief Refunds

In these rapidly changing times one thing remains constant, protecting your lifestyle. Taking care of our clients, our employees and our community is our top priority. I am proud to see that our industry is taking the necessary steps to provide financial relief to consumers and business owners throughout California. Since the shelter in place order many consumers and businesses have been doing their part to stop the spread of the Coronavirus. Now, the insurance companies are providing a little more relief from paying insurance premiums for specific lines of business. We’ll breakdown the latest bulletins from the Department of Insurance highlighting which types of policies are getting relief refunds. It’s important to contact your agent or insurance company and inquire about the steps each company is taking to implement their refunds to policyholders.

According to the Department of Insurance’s Bulletin 2020-3, to protect consumers and to provide consistent direction to the insurance industry regarding misclassifications of risk resulting from the COVID-19 pandemic and to address certain issues raised in CFC’s petition, Commissioner Lara hereby orders insurers to make an initial premium refund for the months of March and April to all adversely impacted
California policyholders in the following lines of insurance, as quickly as practicable, but in any event no later than 120 days after the date of this Bulletin:

Private passenger automobile insurance
Commercial automobile insurance
Workers’ compensation insurance
Commercial multiple peril insurance
Commercial liability insurance
Medical malpractice insurance
Any other line of coverage where the measures of risk have become substantially
overstated as a result of the pandemic.

Commissioner Lara grants each insurer reasonable flexibility in determining how best to quickly and fairly accomplish the refund of premium to policyholders. Insurers may comply with the premium refund order by providing a premium credit, reduction, return of premium, or other appropriate premium adjustment.

It’s important to check with your individual insurance company to inquire about their method of premium adjustment.

Read the full bulletin from The CA Department of Insurance Commissioner, Ricardo Lara

CA Dept of Insurance Bulletin 2020-3

California Department of Insurance Requirement to Accept, Forward, Acknowledge, and Fairly Investigate All Business Interruption Insurance Claims Caused by the COVID-19 Pandemic

Business Interruption insurance is an optional coverage that may be purchased as part of a comprehensive multi-peril commercial policy, business owners’ policy, or on a stand-alone basis. Many small and large California businesses purchase Business Interruption insurance to protect against the loss of income and other losses caused by an interruption to the normal operations of the business.

The California Department of Insurance (Department) continues to encourage businesses to review their policies, including policy exclusions, coverage limits, and applicable deductibles, and contact their insurance companies to determine what their policies cover as each insurance policy is different and the coverage varies. However, despite the Department’s on-going guidance to businesses statewide during the COVID-19 pandemic, it has received numerous complaints from businesses, public officials, and other stakeholders asserting that certain insurers, agents, brokers, and insurance company representatives are attempting to dissuade policyholders from filing a notice of claim under its Business Interruption insurance coverage, or refusing to open and investigate these claims upon receipt of a notice of claim.

Therefore, Insurance Commissioner Ricardo Lara finds it necessary to issue this Notice to ensure that all agents, brokers, insurance companies, and other licensees accept, forward, acknowledge, and fairly investigate all business interruption insurance claims submitted by businesses.

After conducting a thorough, fair, and objective investigation of the claim, the insurer must accept or deny the claim, in whole or in part, immediately, but in no event more than 40 days after receipt of the proof of claim. The amount of the claim accepted or denied by the insurer must be clearly documented in the claim file unless the claim has been denied in its entirety. (Regulations, section 2695.7(b).)

If you’re a business owner that has been physically impacted by COVID-19, we highly recommend reviewing your policy along with any exclusions, coverage limits, deductibles and endorsements and contact your insurance company to determine if there is appropriate coverage provided.

Business Interruption Insurance Claims Caused by the COVID-19

We’ve compiled a list of our insurance companies we represent and their claims department information. If you do not see your insurance company listed, refer to your current insurance policy.

Liberty Mutual

Small Business Claims 844-325-2467
Mid/Large Business 800-362-0000

CIG 800-986-9974

Travelers 800-238-6225

Mercury 888- 313-6372

Nationwide 800-421-3535

Progressive 800-274-4499

Safeco 800-332-3226

Encompass 800-588-7400

Kemper 888-252-2799

Chubb 800-682-4822

American Modern 800-375-2075

First American Property and Casualty 800-348-3782

Mapfre 877-627-3735

Stay healthy and safe. Practice social distancing, wear a mask when entering retail establishments, and wash your hands. Everyone is doing their part to flatten the curve. We appreciate everyone’s efforts to assists families, local businesses, and their communities. Thank you for being a part of Alta Vista Insurance.

COVID-19 Relief and CARES Act Bulletin

Posted on April 3, 2020January 12, 2021 by Seth Arruda

In this challenging situation, we remain committed to our clients and doing everything we can to keep the lines of communication open. This is our first blog post about the coronavirus which includes a summary of resources to help our clients and local Southern California business owners navigate through these uncharted waters. There has been a ton of information that has been provided by many credible sources. We collected some of the top resources here for you to access. Here is some basic information on the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27, 2020. There’s also some new tax aids. We’ve provided some links for business aid loans through SBA and San Diego County.

Download The Small Business Owners Guide to the CARES Act provided by the US Small Business Administration.

Click Here

California Department of Insurance Bulletin April 3, 2020

Extension of Policyholder Deadlines that Impact Claims or Coverage Due to the current State of Emergency Caused by the Coronavirus (COVID-19) Outbreak

Read Bulletin From CA DOI

Stimulus Checks

The Act has provided for certain middle to low income taxpayers to receive $1,200 per adult person and $500 per child (under 17). The key factor in determining whether you qualify for the check is what your adjusted gross income (AGI) on your household’s tax return. This is line 7 on your 2018 form 1040 and line 8b on your 2019 form 1040. The limits are based on this AGI:

Single Filer $75,000-$99,000

Married $150,000-$198,000

Head Of Household $112,500-$148,500

To receive a payment, there is generally no action you must take. As long as you have a valid social security number, the IRS will calculate your allotted stimulus check amount. You do not have to have filed your 2019 tax return yet. If there is no 2019 return, the IRS will go to 2018 filing. If you do not qualify based on 2018 or 2019 income but will in 2020, then you will receive the money as a credit when you file your 2020 return. If you end up making too much in 2020, then you will pay it back on your 2020 tax return. This money is an upfront credit. It is NOT taxable. All dependent children under 17 will earn the $500 no matter what your income level as parents is. Dependent children over 16 will not receive any money. The IRS estimates the checks to go out in 3-4 weeks. Taxpayers with a bank account on file with the IRS will have their checks automatically deposited. Others will have checks mailed to them.

See this Stimulus Calculator to see what amount, if any, you will receive.

Stimulus Calculator

San Diego County Rent Forgiveness:

Some local businesses can ask for rent relief. Please see
the site below to see if you qualify.

SD County Rent Forgiveness

Small Business Guidance and Loan Resources

Phase II Relief Programs for Business Owners

This loan program through the SBA is for small businesses affected by the coronavirus in presidential and SBA declared disaster areas. This program provides loans up to $2,000,000 with 3.75% interest rates for profit businesses. Businesses can get loans to pay for payroll costs, accounts payable, rents, and other fixed debts. Customer Service number is 800-659-2955.

Apply directly to https://disasterloan.sba.gov/ela and select Economic Injury as your reason.

Apply Now

Phase III Relief Programs Small Business Interruption Loans

NOTE: If you received a Phase II loan it may make you ineligible for this

This is a forgivable loan program through SBA 7(a) lenders. Eligible businesses (including sole proprietors and self-employed) with less than 500 employees. The business MUST have been substantially affected by COVID-19. The program will loan the lesser of $10 million or 2.5 of average total monthly payments (payroll, rent and debt) over the last year period. The money from the loan may be used for employee salaries, payroll support (up to $100,000 per employee) including costs related to health care benefits and sick and family leave, rent or mortgage payments, utilities and debt obligations incurred before the loan. This loan is eligible for forgiveness (which will not be taxable) if the employer maintains continued payroll and other allowable costs for a covered period. In order to apply for this loan, please consult the banker in which your business has a relationship. The SBA will be overloaded and is reaching out to have banks help them through this process.

Other CARES Act Tax Incentives

Retirement Accounts:

If you are under 59 and a half you may withdraw up to $100,000 from your retirement plan or IRA without the 10% withdrawal penalty. You may put the monies back before year end for no tax consequences.
You can also borrow double the amount (up to $100,000) from your retirement accounts or 401k.
Retirees can waive their required minimum distributions for 2020 so as not to take money out of the market.

Tax Credits:
Small businesses who pay employees sick leave for two weeks for quarantine or sick family member or children at home due to school closings or up to 3 months of family or medical leave for the same reasons. Contact your payroll service for the coding for this.

Payroll Tax Deferral:
If your business did not take advantage of the forgivable loan packages mentioned above, then you are eligible to delay payment of payroll taxes. (50% in December 2020 and 50% in December 2021)

Charitable Contributions:
There are 2 significant changes here. If you are a taxpayer that does not itemize, you may in 2020 get up to $300 deduction “above the line” plus your standard deduction. If you itemize the charitable contribution limits will be waived as long as it a direct gift to the charity.

Student Loan Payments:
Any federal student loan payments are suspended without further interest accrual until September 30, 2020.
Resource: Katherine M Thompson, CPA and Richard Dally CPA, Dennis & Dennis LLP Phone (858)487-7232 Kathythompson@dennisanddennis.com

Coverage vs. Coverage: How does your liability policy stack up?

Posted on August 12, 2019January 12, 2021 by Seth Arruda

In the event something happens to someone else your liability insurance can protect you.

If you own a home, drive a car, own a business, sell something, hire someone for a job, or other related activities, you have exposure to losses. Carrying a liability policy will provide money for damages to other parties in the event you are liable for injuries or expenses associated with a claim like investigation costs, legal representation, or other expenses.

Liability insurance is a way to protect your lifestyle and assets from being taken in a judgment.

What would happen if someone sued you and they won?

What if a judgment was rendered against you and it wasn’t covered by your liability policy; like your homeowner’s liability or general liability if you own a business?

You may have to liquidate assets, a lien could be placed on your properties if they are exposed, your wages could be garnished, etc. One lawsuit could completely change your lifestyle. That is why umbrella and excess liability insurance is MUST for everyone.

Both umbrella and excess insurance are designed as an additional layer of protection above primary insurance policies, like homeowners, auto, commercial general liability, and commercial auto.

Which is better?
What type of policy do I have?
Should I purchase more insurance?

Let’s look at these policies and see how they stack up against each other.

An umbrella policy has two types of coverage; coverage above other insurance policies (that’s the underlying insurance) and coverage for liability exposures for which there is no underlying insurance.

Watch this short video about the importance of umbrella insurance for your personal assets.

https://youtu.be/L3mtIEuwBy0

Get a Quote

According to the ISO CU 00 01 insuring agreement for coverage A,

“we will pay on behalf of the insured the “ultimate net loss,” in excess of the “retained limit” because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking damages for such “bodily injury” or “property damage” when the “underlying insurance” does not provide coverage or the limits of “underlying insurance” have been exhausted.”

The insuring agreement adds two terms that are not seen in general liability policies; “ultimate net loss” and “retained limit”.

“Ultimate net loss” means the total sum, after reduction for recoveries or salvages collectible, that the insured becomes legally obligated to pay as damages by reason of settlement or judgements or any arbitration or other alternate dispute method entered into with our consent or the underlying insurer’s consent.

“Retained limit” means the available limits of “underlying insurance” scheduled in the Declarations or the “self-insured retention,” whichever applies. Self-insured retention is the dollar amount listed in the declarations page that will be paid by the insured before this insurance becomes applicable, like a deductible, only with respect to “occurrences” or offenses not covered by the “underlying insurance”. The self-insured retention applies for the exhaustion of applicable underlying limits.

This policy is the reigning “pound for pound” champion. It combines both technique and talent to protect insureds from loss.

No matter whether it’s a loss covered by an underlying policy or a loss that is not covered by an underlying policy, the umbrella insurance policy will be victorious and protect the insured.

Now, let’s look at the opponent, the excess insurance policy. The first disadvantage we can see is in the insuring agreement. This policy only has one skill or insuring agreement.

“We will pay on behalf of the insured the “ultimate net loss” in excess of the “retained limit” because of “injury or damage” to which insurance provided under this Coverage Part applies. We will have the right to defend the insured against any suit seeking damages for such “injury or damage” when the applicable limits of “controlling underlying insurance” have been exhausted in accordance with the provisions of such “controlling underlying insurance”.

Again, we need to look at the terms so we can define what is covered. “Ultimate net loss” means the total sum, after reduction for recoveries, or salvages collectible, that the insured becomes legally obligated to pay as damages by reason of:

Settlements, judgements, binding arbitration, or
other binding alternate dispute resolution proceeding entered into with our consent.

“Ultimate net loss” includes defense expenses if the “controlling underlying insurance” specifies that limits are reduced by defense expenses.

There are many different types of insurance policies that can provide coverage here. Even policies that include defense costs like cyber liability or professional liability.

So, an excess policy can provide protection with many different types of insurance policies BUT there must be an underlying policy that provides coverage. If there is NO underlying policy, the excess insurance is powerless.

“Controlling underlying insurance” means any policy of insurance or self-insurance listed in the Declarations under the Schedule of “controlling underlying insurance.” Controlling is critical. It means the underlying insurance controls how coverage applies.

Umbrella and excess insurance policies are additional layers of protection above primary insurance policies. However, when we put them in the ring against each other, we can see they are not the same. The umbrella is the stronger more well-rounded policy.

In conclusion, the umbrella policy can be used to cover some losses when there is NO insurance. The excess policy only covers losses that are covered by the other insurance policies that exist as primary insurance.

Now, it’s always important to read the entire policy. There are exclusions, conditions, and definitions that you should review with your agent in order to determine which protection you need.