Umbrella Liability: The Triple Upsell Possibility for Personal Lines Clients

When it comes to most of the personal lines market, it’s pretty straightforward. A person buys a car, and they need insurance. A person buys a home or rents an apartment, and they need insurance. Often, they can benefit from the marketing device we call bundling because they have both. Is that all that the insurance consumer needs? Could they benefit from some additional risk management?

What About an Umbrella Policy?

You’re probably aware, but just in case you aren’t, an umbrella policy is a liability policy designed to go over other liability policies to provide additional insurance for underlying coverages and potentially provide coverage for events that may be excluded or not anticipated by the underlying coverage.

You might be wondering why you should even attempt to sell personal umbrella policies, especially since most insureds aren’t walking through the door, begging to buy more insurance. That’s a fair question and here are a few thoughts.

It’s a triple upsell opportunity.

Because an umbrella policy provides additional insurance above other policies, we have to consider what other policies it’s going over. In the personal umbrella market, we are specifically looking at the personal auto and homeowners (renters’ contents or condominium unit owners’) policies.

Opening up the conversation about an umbrella policy allows you to discuss liability limits on those other two policies. A personal umbrella policy will require a minimum limit of insurance for all underlying policies. The insured who is carrying a $100,000 auto liability limit may have to upgrade to $300,000 to qualify for an umbrella. The same applies to their homeowners liability limit.

The client who is interested in a conversation about a personal umbrella policy may not be as price sensitive as other clients, but the other side of the coin is that liability insurance tends to be less expensive compared with what they are getting. For them, the money spent on the increased auto and homeowners limits added to the umbrella limit is money well spent because it provides an additional layer of protection.

Cost of Liability Risk

Today’s liability exposures are higher.

You’ve probably noticed that everything is more expensive today. This is not new, but it is something that clients are particularly focused on lately. This truth then puts us in a potentially uncomfortable position. The insured is already likely paying more than they used to for their insurance and now you’re asking them to pay even more for the policies that they already have and buy a new policy on top of everything else. But there are some good reasons to make the ask.

Liability claims are going up. I was involved in an auto accident several years ago. The other party hired an attorney and sent my insurance company a demand letter for my policy limit. They probably did some digging and realized that I didn’t have much else. My company responded with an offer of $5,000.

I didn’t hear much for a little while so I called to find out what had happened. Turned out that they were happy with the $5,000.

It’s a little more complicated than that today. If the accident causes significant enough bodily injury or property damage, the demand letter could be much higher. The highways are littered with billboards shouting the high-dollar judgments that certain attorneys have gotten their clients. Depending on all of the facts of the case, the demand letter could be much higher than the liability limit and the insured could be personally responsible to make up the difference between the judgment and the limit of insurance.

If the client ends up with a judgment against them that exceeds their limits, that puts the rest of their assets at risk. This goes back to why we buy insurance in the first place. Insurance is there to pay for claims that we cannot afford on our own and to protect our assets from the potential of being lost in a judgment.

Personal umbrella insurance isn’t as exciting as cyber coverage. It’s not as ubiquitous as homeowners or auto insurance. But umbrella coverage is a key part of a client’s personal risk management strategy and should be considered a part of their protection package.