A personal umbrella is a specialty product used to enhance the protection provided by your home and auto policies. Commercial umbrellas are much more complex and reflect the esoteric and unique needs of various businesses. It is hard to say what the umbrella coverage rate cost will be.
Most “umbrella” policies written today are really “following form” excess liability policies. There are two main differences between “following form” excess liability policies and “umbrellas”.
An umbrella will provide the difference between the limit of liability provided in your primary policy and the amount of the “umbrella”. For example; your primary auto policy has a property damage liability limit of $250,000. If you have a $1,000,000 umbrella the “umbrella” will pay as much as $750,000 for a property damage loss should you become liable for that amount.
A “following form” excess liability policy will offer the complete limit of liability in “excess” of the amount provided in the primary so if you had a $1,000,000 limit of liability in you following form excess policy it would pay as much as $1,000,000 if you become liable. In the above example with a $250,000 limit in the primary you would have a total of $1,250,000 in coverage available.
Umbrella underwriters often start their pricing considerations using a formula based on the primary premium times a factor. For example, if they’re writing “excess” of $250,000, and were providing a $1,000,000 limit, they probably would want about 35% of the primary liability premium. Depending upon the volatility of the risk they would vary that pricing up of down.
Personal umbrella underwriting is less sophisticated. They charge a minimum premium of about $150 and will increase the amount for each additional auto beyond two and any other special consideration. They avoid celebrities and other people who might be lawsuit magnets.
Underwriters are interested in your credit score, your driving history, and your loss history . . . and will order reports on all of that.
You can usually reduce the cost of your umbrella, or excess policy, by placing it with the same company who has your home and auto.
When you start to look for umbrella limits in excess of $2,000,000 the underwriters will become a lot more concerned about such things as your net worth, whether you own a business, what boards you serve on, and whether or not your home has a pool or trampoline.
To find the best value you should work with an independent agent you know and trust.
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