hard · Certified Financial Planner Investment Planning
The Saini household carries a homeowners policy with $300,000 of liability coverage and a $1,000,000 umbrella policy. The umbrella requires a $500,000 underlying homeowners limit. A $600,000 judgment is entered against the client for a covered slip-and-fall injury.
What is the client's out-of-pocket exposure?
- $100,000, as the umbrella policy is typically required to drop down in the event of an underlying limit mismatch.
- 0, because the total coverage of 1,300,000 exceeds the judgment amount.
- $200,000, representing the difference between the actual homeowners limit and the umbrella attachment point.
- $300,000, as the homeowners policy must pay its full limit before the umbrella responds.
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