The Umbrella (Not All are Red)

The logo for one of the world’s largest insurance carriers, Travelers, is the red umbrella. This umbrella is meant to symbolize protection for all those underneath it. There are many reasons why an insurance carrier like Travelers would use this symbol to represent insurance. In general, the purpose of insurance is to provide coverage for specific interests may it be your business, car, employees, health, home, etc. Coverage afforded under these specific insurance policy(s) entitle the policyholder, you, to protection and/or recovery within the policy limits of liability WHEN the terms and conditions are met.

Now for 99.9% of the insurance claims, your current insurance policy will cover the claim because the policy limits of liability are sufficient to cover the loss. However, what happens when your current insurance policy limits are exhausted/spent and there are more costs associated with the claim or even a lawsuit for additional monies… You may ask yourself, “What happens now?” There are three options for when this occurs:

  • Option 1 – the plaintiff or claimant settles the claim and indemnifies you and the carrier. The claim is closed when this occurs, and no further action can or will be taken.
  • Option 2 – the claim continues and without an umbrella policy, the additional costs will be paid by you directly. This may be willingly or due to legal action taken by the plaintiff of claimant.
  • Option 3 – if you have an active umbrella policy, these additional costs will be paid under the umbrella policy limits.

There are instances when the additional costs may be covered under another policy, not the umbrella; however, this may occur when the same carrier ensures multiple policy(s) for you or there may be sublimits built into the respective policy(s). In these cases, coverage is determined by the carrier subject to the terms and conditions of the policy. Please review your current policy(s) and determine whether an umbrella policy is in your best interest.

Recently, umbrella carriers were forced to increase premiums by ~20% due to an increase in the number of claims and the cost of claims. This increase effected both commercial and personal umbrella policyholders universally. Previously, those who purchased an umbrella policy rarely filed claims under the policy. The respective underlying policy (policy under the umbrella) had sufficient coverage and limits to satisfy claims.

So, what caused this increase in umbrella premiums?

There are several factors involved with the increase to the umbrella premium. Here is a list of some of those factors:

  • Class action lawsuits
  • Construction defects
  • Frequency of claims
  • Government
  • Legal rulings and precedence
  • Material costs
  • Medical expenses
  • Natural disasters (flood, hurricane, wildfire, etc.)
  • Recalls of food, products, or any other goods
  • Statutes of limitations
  • Tort reform

*There are several other factors not referenced above that contribute to this increase.

For additional resources regarding the umbrella policy, please connect with Northgate via LinkedIn or Facebook. You will find additional resources regarding your insurance policies. If you need any assistance regarding insurance, please visit or contact our corporate office at (916) 349-8879.