PERSONAL UMBRELLA POLICY

My client is a successful real estate broker and operates his business as a sole proprietor. For the business he carry's general liability insurance as well as an errors and omissions policy .

Additionally he has a 3 million dollar personal liability umbrella policy which costs him $656 annually . At first brush my thought was the premium for the personal umbrella policy is non-deductible for both the auto expense portion as well as Schedule C. He told me the primary reason he has an umbrella policy is the substantial amount of driving that he does and the relatively low liability coverage offered by his insurance company .

Should the entire amount be deductible as a business expense or a portion and if so where to report ? (auto expense or Schedule C insurance line )

I would argue that the main reason for the umbrella is the business. That is where any excess liability would arise. There are business and personal umbrella policies (Is his house covered, etc.). You might inquire whether this is classified either way. At a minimum, I would deduct some of it.

Does the umbrella exclude liability resulting from business activities? If not, did he need to pay more for his umbrella and/or automobile liability policy due to the extensive business use? That could pin down the deductible amount (or trigger a needed review of his actual coverage).

Yes the umbrella policy excludes liabilities arising from business activities ; that's why he has a separate General Liability policy .

He told me the primary reason he has an umbrella policy is the substantial amount of driving that he does and the relatively low liability coverage offered by his insurance company .

Yes the umbrella policy excludes liabilities arising from business activities

How can there be a business deduction?

Umbrella policy premiums are always personal and are never deductible.

Umbrella policy premiums are always personal and are never deductible.

Even if there is a separately stated, billed, and paid line item for "In Home Business Coverage"?

An umbrella policy is a personal liability insurance - look up the definition. If it is actually an "umbrella" policy, it is never deductible. If it is some other kind of policy to which he incorrectly refers to as an "umbrella" policy, then it is different.