Like many insurance policies, the umbrella market continues to be in a very volatile state. It was only a few years ago that you could easily obtain a $100M umbrella limit and pay $1,200 in premium. Those days are long gone and for now it seems like they may never return.
There are a number of reasons for this, but social inflation played a big role in the changes. Jurors are awarding claimants higher payouts, which are costing insurance carriers more money in claims. Certain carriers were not profitable or not as profitable as they would have liked to be, so they have pulled out of the umbrella market. This is leaving a strain on the insurance industry as brokers scramble to find replacement policies for their clients. With only a few viable options, the carriers are becoming overwhelmed with submissions and doing everything they can to keep up with the demand. However, not every account is going to fit the underwriting requirements of the remaining carriers. This leaves associations with even fewer options where the premiums could be as drastic as $25,000 for a $5M limit!!! An umbrella policy is ideal, but sometimes (especially recently), an umbrella policy is not always an option. The next best option is an Excess Liability Policy.
What is the difference between an Umbrella and an Excess Liability Policy?
A well-written, standalone umbrella policy will sit over the underlying general liability policy, underlying Directors & Officers policy, and underlying worker’s compensation policy, while an Excess Liability policy will generally only sit over the underlying general liability policy. This leaves you with only whatever your D&O limit is (usually, it is $1M in coverage) and no additional liability coverage above and beyond that. One option is to ask for a $2M limit on your D&O policy, but not all carriers will offer this.
To make things more confusing, not all umbrella policies will sit over and extend to all of those coverages mentioned above. More and more package carriers are starting to offer an umbrella or excess policy in addition to their property & liability package, and more often than not, when the package carrier is offering the umbrella policy, then it will not sit over the D&O and workers comp.
Yes, insurance can be very confusing and frustrating at times. It is crucial to have your insurance broker review your policies and options with you annually so that you know not only what you are covered for but what you are paying for as well.
If you live in one of the five boroughs of NYC and you want an umbrella policy, it is crucial that you have your building cleared from any DOB and/or HPD Violations. Umbrella carriers consider these while underwriting the policy and will decline to offer coverage if certain violations are present.
Regardless of where you are living, the umbrella carriers are starting to become more and more concerned about the age and condition of your building. They want to see new roofs and updated plumbing and electrical systems. It is crucial to service and maintain your building and the various operating systems within it.