Umbrella Insurance Rates Are on the Rise

Oct 9, 2021 | Personal Insurance

Today, we take a look into Umbrella Insurance, the premiums, and why these rates are currently on the rise.

Umbrella Insurance

The best kind of insurance is the one that will protect you from financial loss and liabilities. When you buy your first home, you will need home insurance. When you buy a new car, you will need auto insurance. When you buy a boat, there’s boat insurance. Almost every big investment comes with insurance coverage that can help you in cases of theft, vandalism, damages, and other disaster risks. 

Having all these types of insurance is well and good. It is part of being a responsible owner. However, coverages from insurance policies come with a limit. If you exceeded the limit, you are liable to pay for the difference out-of-pocket. Insurance companies have a solution for this. It is called Umbrella Insurance or sometimes known as Personal Liability Insurance.

Umbrella Insurance is extra liability coverage that will protect you and your assets if you are sued for damages and your home, auto and other insurance policy limits have been exhausted. For about $100 a month, you can get up to $1,000,000 umbrella insurance coverage. This will help you fill the gap if the settlement exceeds your policy limit.

Rising Rates Of Umbrella Insurance

Premium rates have been steadily rising since 2010. But the most significant increase was seen in 2020 when most people are suffering from financial losses due to the pandemic. Add that to the number of forest fires, hurricanes, and other natural disasters that occur in the last two years, and the result – higher premiums. 

Other than the reasons mentioned above, there are more reasons why rates are rising for umbrella insurance.

Factors and Reasons for Rising Umbrella Insurance Rates

  1. Rising Motor Vehicle Accidents 

You would think that with the lockdowns and work-from-home status, there will be fewer accidents on the road. That is not the case. The National Safety Council reported that more than 40,000 people died from car accidents in 2020, an increase of more than 8% from 2019. The culprit? Speeding.

The fewer cars there are on the road, the more space is available. These empty roads tempt drivers to drive faster and over speed. This leads to vehicle crashes which leads to more auto insurance claims and a rise in premiums. 

  1. Attorney Involvement in Claims

If you have been watching television, you will see “TV Lawyers” advertising themselves for personal injury cases. These attorneys are the ones raising premiums because of the substantial liability claims that they can get for their clients. 

An insurance company will want to give you the least payout possible. You as a claimant would want the maximum payout. If no middle ground is agreed upon, the solution is to hire an attorney. He can help you to get your claims in a timely manner at the maximum amount. If the value of the claim increases, insurance companies have no other recourse but to raise umbrella insurance rates as well. 

  1. Lawsuit Financing 

Lawsuits are expensive. The time, energy, and money spent in litigation are just too much for some. Lending companies have a solution for this. Lawsuit financing firms are willing to provide loans to plaintiffs so they can continue with the litigation. Payment of loans will depend on the agreement between the claimant, attorney, and financing company. 

  1. Lawsuit Investing

Investors have found a new way to turn litigation into a lucrative business. Investing in a lawsuit hoping for a big payout or settlement is a growing trend and is mostly unregulated. These investors invest their money to pay for litigation and takes a percentage cut from the settlement after. 

  1. Reinsurance

Reinsurance is where an insurance company purchases policies from other insurers to limit their loss. In other words, it is coverage for insurance companies. This practice reduces the likelihood of a large payout to an insurance claim.  

  1. Medical Care Cost Increase

The cost of medical care is rapidly rising. The cost of claims from all sides is also rising. All of these affect the premium on umbrella insurance 

  1. Higher Value Jury Awards

Juries tend to go against insurance companies. They award large sums of money to claimants which in turn will give the insurance companies more reason to raise premiums. 

Who Needs Umbrella Insurance?

A lot of people think that umbrella insurance is just for wealthy people. A common misconception is that if you have no assets, there is no need to get one. What you don’t know is that if you don’t have any assets, your wages can be seized. Your future income can still be used to pay for the settlement.  There are also high-risked individuals who need umbrella insurance to protect them from lawsuit claims.

High-Risk Individuals

  1. People who have dangerous work or jobs 

If you work as a truck driver, you are a great risk on the road. You can be involved in a car collision and the other driver can sue you for injuries. If you operate a tractor and damages someone else’s property, you can also be held responsible and be sued by the property owner. 

  1. People who have pets

Dogs in particular are prone to injuring other people. If you are the owner of the dog, you will be held responsible for the medical expenses of the injured party. You might also be sued for negligence. 

  1. People who have dangerous hobbies

Skiing, hunting, surfing, driving motorcycles are all dangerous hobbies that increase the chances of being in an accident. You can be held responsible for accidents and injuries that may happen to other people due to these dangerous hobbies. 

  1. People who have significant assets

In case of a major lawsuit, you are at risk to lose your properties and other assets if you lose the case. You might need to sell them to pay off the difference between the awarded amount and your existing liability insurance. 

  1. People who have potential future income

Even if you don’t have the money now to pay the plaintiff in your case, a judge can require you to pay it off by allotting a certain percentage of your monthly income to pay your debt.

  1. People who have a business

Any kind of business is risky. You will not be able to prevent a disgruntled employee or a customer to sue you for damages. Having that extra umbrella insurance will help you and your business in case of lawsuits. 

  1. People who have pools and trampolines in their home

These special features and amenities in your home are considered high risks. They are potentially dangerous and can cause many accidents and injuries, especially to young children.  You can be held responsible and liable for these types of amenities

  1. People who coach sports

Coaches are responsible for their players’ health and safety. You can be legally answerable if any of your team players are injured or got into an accident. 

  1. People who frequently have guests

Having guests at home doubles the risk of injuries in your house. If they slip and fell, they can hold you responsible and sue you for their misfortune.  

How to Save on Umbrella Insurance

The rising cost of umbrella insurance may deter you from getting one. But before you decide not to purchase, think of the out-of-pocket expense you will need to shell out if you are sued for injuries, accidents, or even death. Your assets can be garnished and your future income may also be wiped out. 

Even if the rates are on the rise, you can still save for your insurance. Here are some money-saving tips:

  1. Ask for Discounts

Always ask for discounts. Most insurers give discounts if they have a good relationship with their clients. 

  1. Compare Insurance Quotes

Even if you already have a trusted insurer, you can still shop around. Know what the competitor has to offer. They may give discounts to entice you to transfer your policies to them. 

  1. Bundle With Your Other Insurance Policies

If you have existing insurance policies with an insurer, ask for a bundle discount. Bundling will significantly lower your premium payments. 

  1. Increase the Deductible on All Your Insurance Policies

Increasing deductibles on your home and auto insurance can help you save on premiums. The money you will save can be used to increase coverage or can be used to avoid making small claims for a better insurance record. 

  1. Maintain a Good Credit Record

Any kind of insurance policy will require a good credit record to lessen the cost of premiums. Reducing your debts and paying on time are just some of the ways to get a good credit score rating. 

The rising cost of insurance premiums should not dissuade you from purchasing. At times like these, it is more important that you protect yourself and your family from financial losses and stress. Knowing that you are protected will give you that peace of mind that you need. 

Insurance is an integral part of financial planning. Its many benefits outweigh the premium costs that you have to pay for. If you are on the lookout for a good team of insurance agents, contact team Advantage Insurance Solutions (AIS). We are more than happy to help you with all your insurance needs. Our team of knowledgeable agents will be your guide to find the right protection for you and your family.