Umbrella Coverage – Why is it important?

The definition

A personal umbrella policy provides additional coverage when a client’s base liability coverage is exhausted. It covers legal fees and loss of income associated with liability claims – even for incidents that occur outside of Canada.

The challenge

Coverage that protects property is an easy concept for clients to buy into. It’s straightforward to understand and is often mandatory. The need becomes less clear when it comes to coverage that protects against legal action.

Many clients associate liability with businesses or high-income earners. The reality is that most of us are targets for legal recourse, even when going about our regular, low-risk lives. Pet owners, social media users, people who do volunteer work… wealthy or not, these people are all vulnerable.

Trends suggest that Canadians are becoming more litigious, and court cases are resulting in larger payouts. And while lawsuits don’t directly result in the loss of the ‘things and stuff’ protected by standard personal insurance policies, people could indirectly lose assets if they need to come up with the cost of an unexpected settlement.

Finally, when you consider the modern hazards that impact our safety (e.g. texting while driving), it’s hard not to appreciate how unpredictable an everyday task can be – or how far a resulting lawsuit can go.

Start with a conversation

Get to know your clients. Sincere engagement does wonders for customer loyalty, and it has the side effect of revealing important insights. For example, do they:

  • Have children?
  • Have hobbies?
  • Do volunteer work?
  • Travel frequently?
  • Own rental properties?
  • Use social media?

Clients who answer ‘yes’ to any of these questions are candidates for personal umbrella coverage. What’s holding them back? Awareness is a major factor. But once you resolve that…

Overcome the “it won’t happen to me” mentality

There’s a misconception that court battles are the stuff of TV dramas. In many people’s minds, their ‘boring lives’ are enough protection. Here are four relatable scenarios to share with your clients to demonstrate how a personal umbrella policy could save the day:

  1. Social Media. Personal umbrella coverage protects against libel, slander and breach of privacy. The level of confidence internet users feel when posting from ‘behind the keyboard’ makes it too easy to broadcast messages to hundreds or thousands of people. All it takes is one person to retaliate; whether it’s the proprietor of a restaurant who receives a defaming review, or the parent of a child whose photos are shared.
  2. Teenagers. They’re maturing and finding their independence, which is exciting for parents to see. What can be concerning is the fact that they don’t fully understand the scope and potential impact of their behaviour. And if a dependent is responsible for a damaging action or breach of privacy, the parent may be responsible.
  3. Mandatory or not, auto accidents are so common that it’s undeniably smart to have this coverage. But base policy limits are relatively low considering the potential damages. When someone is at fault for a collision involving multiple vehicles – especially if any of the victims experience loss of future income or require long-term care – their standard coverage gets eaten up quickly.
  4. Hosting events. Small get-togethers involving close friends and family appear low-risk at first glance. However, unpredictability increases when you add variables like alcohol, pets, or small children. We hope our loved ones wouldn’t sue, but in cases where compensation is needed, the decision to pursue legal action becomes less personal and more about necessity.

A personal umbrella policy is often more affordable than increasing liability on each individual base policy, and it protects the actions of your clients and their families wherever they are in the world. As sensibly as we might go about our lives, we are all subject to the unpredictability of other people’s actions.

The bottom line for your clients; our world is evolving, so the way we protect ourselves must change too.

Graham Haigh began his insurance career in BC in 1994 after earning his Bachelor’s degree from Simon Fraser University and attaining his FCIP and CAIB designations. He is a past President of the Insurance Institute of BC and an award winning instructor for the Insurance Institute of Canada’s CIP program.

He joined Wawanesa Mutual Insurance Company in 2009 as Regional VP for BC & Yukon. In 2015, Graham moved with his family to Winnipeg to run Wawanesa’s Central region. He accepted the role of VP, Broker Distribution in 2019.

He can be reached at 204-985-3930 (office) or by email at


$200 000 Liability for Auto insurance is the minimum, but far from the standard.

Although Ontario motorists can legally put their vehicles on the road with as little as $200,000 in liability coverage, brokers likely wouldn’t want one of those motorists for a client.

“There is no way you can justify why you sold someone a $200,000 [auto] liability policy,” Rick Orr, Stratford-based owner and account executive at Orr Insurance Brokers Inc., said Friday in an interview.

As a general rule, Orr’s private passenger auto clients carry $2 million in coverage because awards from successful motor vehicle accident lawsuits are sometimes well over $1 million. So the fact that Ontario private passenger vehicle owners are only required by law to buy $200,000 in liability coverage is “totally antiquated,” said Orr, a former president of the Insurance Brokers Association of Ontario.

“It seems odd that nobody has updated it,” said Orr. “We don’t have a single client that would have less than $1 million in liability coverage.”

Orr says it’s not hard for brokers to up-sell to $2 million, partly because the client only has to pay an extra $100 or so a year in premium.

“The last time I looked, which was a long time ago, the [annual premium] difference between $200,000 and $1 million wasn’t much,” he said. “We will get some people who say they don’t need $2 million, but nobody in a long time has ever said they would want less than $1 million in coverage.”

Most brokers realize it would become an errors and omissions risk if they were to sell a client a liability policy with a limit of only $200,000.

“There are all kinds of incentives to make sure consumers are properly protected, because if not, they are coming after us at the end of the day,” Orr said.

Saskatchewan also mandates $200,000 in liability coverage. Unlike Ontario, however, the Saskatchewan government has a monopoly on basic auto through the public insurer SGI. In Saskatchewan, the basic plate coverage has created an issue.

About half the motorists in Saskatchewan have only “base plate coverage,” Dave Pettigrew, president and CEO of brokerage Harvard Western Insurance, told Canadian Underwriter in 2018. At the time, the Insurance Brokers Association of Saskatchewan formed a committee to make sure that motorists in the province were adequately insured.

In Ontario, there is more than one reason to buy liability limits far in excess of the mandatory minimum. “Another reason you should be carrying higher liability coverage is [that] you are actually protecting yourself against people who don’t carry enough,” Orr said Friday.

For example, an optional family protection endorsement provides coverage if the broker’s client gets hurt, sues the at-fault motorist, and the at-fault motorist turns out to be underinsured. As Orr explains, using a hypothetical example: “If I get hit by a 17-year old who has $500,000 or $1 million in coverage, and they do $2 million in damage to me, and I sue them, my [family protection endorsement] will make up the difference to what my liability limit is.”