Umbrella Insurance

Chapter 1

What Is Umbrella Insurance?

Umbrella Policy Questions:

  Consumers have many choices of insurance types, coming under a variety of names.  Little wonder that they often seem confused or misinformed.

  There are several questions that could be asked:

What is umbrella insurance?

How Does Umbrella Insurance Fit In With General Liability Claims?

When Is Umbrella Insurance Necessary?

What Are Umbrella Policy Characteristics?

How Are Umbrella Policies Underwritten?

  As this course progresses there will undoubtedly be additional questions that could have been added on an individual basis.  As with all insurance types, the first step for the insurance agent is understanding the policies personally; only then may he or she fully explain it to the consumer.  Greater understanding of policy types also means fuller service to the general consumer because the agent will know what is needed for full coverage.

Umbrella Insurance Defined:

  Let's address the first question: What is umbrella insurance?  Jane Bryant Quinn, noted financial author, defines umbrella insurance in the following way: "An umbrella policy covers liability judgments that exceed the limits of your auto and homeowner's policies."  Of course there must be an umbrella policy purchased and in place for this to happen.  Like all liability insurance types, the policy may not be purchased to cover an incident that has already occurred.

“An umbrella policy covers liability judgments that exceed the limits of your auto and homeowner's policies.”

Liability Dollar Figures:

  Certainly there are variations, but typically the consumer carries $300,000 worth of liability on their basic policies.  After that, umbrella policies pick up liability claims up to $1 million or more.  Again, figures can vary, but these represent the normal situation.

Price Variances:

  Prices vary, too.  Premiums tend to be based on the number of vehicles that are owned.  Costs will be somewhere between $100 and $500 per year depending upon multiple factors.  Some companies may even include a $1 million liability option into the standard auto and homeowner's policies.  If this is the case, the consumer still must elect to purchase the option in order for it to be included.

  Although there are always exceptions possible, umbrella coverage will defend the purchaser not only against claims of damage or personal injury, but also against libel (except for some professions of a public nature), slander, false arrest, invasion of privacy, and similar charges that could cause personal harm.

  As with all insurance products, prices should be compared.  Usually price comparison is the easiest way to save insurance dollars.  Insurance agents often wrongly assume that price comparisons are only for consumers.  This attitude is unfortunate.  Even agents need to constantly compare prices.  Every other industry does so as a means of staying competitive and insurance should not be any different.  If the agent's product does cost more the agent should try to find out why; are there added benefits or security in the policy?  If the product is simply higher for no apparent reason, the agent may want to represent a different product that is less expensive for the buyer.

  According to author Sylvia Porter, some insurers charge up to 50 percent more than others.  Of course, this is not publicized!  The customers simply do not realize it and maybe their agents are not aware of it either.

  Why would an agent want to sell a lower priced product?  The reason is one of logic: happy clients tell their friends.  When an agent is able to save a client money, they tell others, which in turn brings the agent additional business.

  Many types of products are not price advertised and umbrella insurance tends to be one of them.  No single company always has the best rates, so the agent will need to invest some time initially, but it is time well spent.

  Few consumers tend to shop around.  They would rather depend upon their agent to do it for them.  Many agents prefer to carry more than one product.  In this way they can demonstrate to their clients that they have compared products and pricing.

Whatever product or products the agent chooses to carry, it is important that financial strength is present in the issuing company.  Professionals recommend an A company rating or better.

End of Chapter 1