An umbrella is also known as “excess liability” insurance, and it makes sense because an umbrella provides “more” liability coverage. When pricing out an umbrella policy, a select number of factors go into making it up.
Umbrella Pricing Components
The following is a comprehensive list of the most common items that determine what an insurance carrier will charge. It is not typical for umbrella policies to provide additional coverage via endorsement. Therefore, the following factors are the ones that create your price.
- Vehicles – The number of cars in your household will significantly affect the price. Usually, the first car is the most impactful to the price, and the carrier will reduce the charges on the remaining vehicles.
- Your Home – Surprisingly, location, size, and type are not factors in the pricing. However, liability hazards like a swimming pool can yield additional premiums. If you own pets or operate a small business from your house, these too can increase your cost.
- Young Drivers – Youthful, less experienced drivers are another way your price will be on the higher side. Since younger drivers are less experienced, there is an extra premium based on how many are in the household.
- Recreational Vehicles – If you own a boat, motorcycle, ATV, snowmobile, wave runner, or golf cart, you can expect to pay a little more for your umbrella insurance. The more of these you have, the more liability exposure you present.
- Seasonal Homes – Camps and secondary residences are another consideration when determining your umbrella price. Typically, the additional premium is not significant, but you can expect to pay a little more if you enjoy one of these.
- Rental Homes – The insurance provider reviews your rental properties. Keep in mind that each unit counts as a separate factor. If you own two 2-family rentals, that equates to four rental properties. They can add up!
- Insured Elsewhere – When purchasing an umbrella from a large insurance carrier, they expect to insure all of your stuff. Assuming the carrier writes those lines of business, insuring them elsewhere can be costly. For example, if your motorcycle is insured by a different carrier than the one selling you an umbrella, you can expect an added surcharge. The surcharged amount can vary by carrier.
What else should I know?
The seven factors mentioned above are the most related to the price of the actual umbrella policy itself. One additional piece adds a premium, but not to the umbrella. Your insurance carrier will have requirements about the amount of liability insurance on your other policies.
The liability insurance listed on your auto, home, boat, and additional property policies will require a minimum dollar amount of coverage. If you do not currently have coverage of at least the minimum amount, you must increase it. This extra coverage will add more expense to each of those policies. Do not be too alarmed here. That little bit of additional premium likely won’t amount to much, or there is a good chance you already carry the minimums!
What about “You”?
Yes, most of your umbrella insurance premium comprises the pieces and parts we have mentioned; a “you” factor does remain. Just like with auto insurance, your credit history will carry weight. Past credit problems can increase the overall rate. That is not even the most significant item, though. What is most important is your past claims history. Insurance carriers will go back five years to determine if you have filed a claim on any personal insurance policies. Prior claims can drastically affect the premium, especially liability claims. Watch those tickets too. Too many moving violations can end up costing you a lot more or could prevent you from qualifying for the policy at all.
Now you know the main pieces that help to determine your umbrella insurance premium. It all comes down to what you care most about and the extent you want to insure it. The Horan Companies team of insurance professionals is here to help guide you through those insurance decisions. Call or contact us, and remember, we will not spam you or sell your information. We’ve got you.