PERSONAL UMBRELLA UNDERLYING INSURANCE REQUIREMENTS

(November 2023)

Agents and brokers have to keep current with the underwriting requirements of companies with which they arrange personal umbrella protection. A key responsibility is to carefully monitor underlying insurance requirements.

The above precaution allows an insurance professional to handle renewals and new policies without unnecessary delays and problems. One practical, time-saving step is to make certain that underlying insurance is renewed at current required limits so that such policies need not be endorsed with higher limits at the time of renewal or when new umbrella insurance is ordered.

The minimum required limits may vary by insurance carrier and are established for all sources of primary coverage such as the following:

• Automobile
• Comprehensive Personal Liability
• Watercraft Liability
• Non-Owned Automobile Liability
• Owned Recreational Vehicle Liability
• Professional Liability insurance
• Other vehicle or craft liability policies

Depending upon the state or company preference, the limits may be expressed as split limits or as combined single limits. It is rare for required limits to be below $100,000 and much higher limits, such as $250,000/$500,000 split or $300,000 combined for auto liability, are likely.

It is a condition of coverage that underlying insurance for the limits specified in the declarations be maintained during the term of the umbrella insurance. Accounts need to be monitored carefully to avoid errors or miscommunication about intended protection.

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Special problems may be avoided by monitoring an account. Maintaining contact with a client may prevent gaps or overlapped coverage. Inquiries made to a client could uncover the existence of previously unknown exposures such as newly acquired vehicles or craft, in-home business activity, or additional property or driver exposures.

Example: A-Beta Agency handles the personal account for the Mannerly Family. They have sold the Mannerlys a full array of personal lines policies including an umbrella. In order to keep tabs on their client, they regularly send questionnaires prior to policy renewals. An agent is reviewing the latest questionnaire and discovers that the family has begun hosting a foreign exchange student who is also allowed to drive the family’s cars. He also notices that Mrs. Mannerly has started a mail-order craft business. The agent contacts the Mannerlys for a visit to discuss how these new exposures are properly met by their underlying and umbrella coverage.