1. Which of the following planning recommendations is least prudent in terms of risk management strategy?
Add an inflation guard rider to the homeowner’s policy.
Downgrade the homeowner’s policy from an HO-5 to an HO-2 policy on a high-end residence.
Increase the underlying liability limits of homeowner and auto policies to the minimum required for the umbrella to stack without a gap.
Consider dropping other-than-collision insurance (Part D) on an old, low-value vehicle.
Increase the deductible on the homeowner’s policy if the client has cash flow difficulties.
2. Which of the following statements correctly describe the characteristics of an umbrella liability policy?
(1) The umbrella liability policy provides excess liability coverage once the limits of the underlying policy are used up.
(2) The coverage in the umbrella may be broader than the liability coverage in the underlying policy
(3) The insured will face a deductible or self-insured retention in situations where the umbrella covers a loss but the underlying contract does not.
(4) The umbrella liability policy replaces the need for other liability insurance
2 and 3
1, 2 and 3
4 only
1 and 3