Insurance (umbrella policy)?

Question

On a quiz:

Rebecca has a $1 million personal umbrella policy with a $500 retained limit (deductible) for slander and defamation, and a personal auto policy (PAP) with a $500,000 limit. She is at fault in an auto accident that is settled for $600,000. How will this settlement amount be paid?

A. The umbrella insurer will pay the entire $600,000 settlement because it is within the $1 umbrella limit.

B. Rebecca will pay nothing, the PAP insurer will pay $500,000 and the umbrella insurer will pay $100,000.

C. Rebecca will pay nothing, and the PAP insurer and umbrella insurer will both pay $300,000.

D. Rebecca will pay $500, the PAP insurer will pay $500,000, and the umbrella insurer will pay $99,500.

What is the correct answer? I guess where I'm getting confused is when they say there is a $500 deductible for slander and defamation. That makes it sound like you only have to pay the deductible if slander or defamation took place. Thanks!

JJ · Accepted Answer

B. - Correct; The primary insurance is the PAP which will pay its policy limit with the umbrella being secondary to pick up the remaining $100,000.

A - Umbrellas do not provide first dollar coverage unless it covers something that the primary insurance did not cover (like slander)
C - The PAP is primary and the umbrella will not trigger payment until a primary underlying coverage is exhausted.
D - The retained limit mentioned has nothing to do with an auto accident; it is only required for slander/defamation claims.

Anonymous · Answer

Correct.  The deductible wouldn't apply in the auto claim.

The retained limit is NOT the same thing as a deductible.  On an umbrella, it covers some stuff, even if it's NOT covered by an underlying policy.  In the case of a slander suit, where there is NOT underlying coverage, the retainer would apply.

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Insurance (umbrella policy)?

2 Answers