Skip Navigation Links.
Collapse IRMI OnlineIRMI Online
Expand How To Use IRMI OnlineHow To Use IRMI Online
My Paid Publications
Expand What's NewWhat's New
Expand DashboardsDashboards
Expand Commercial Liability InformationCommercial Liability Information
Expand Commercial Property InformationCommercial Property Information
Expand Commercial Auto InformationCommercial Auto Information
Expand D&O, PL, E&O, EPLI InformationD&O, PL, E&O, EPLI Information
Expand Workers Compensation InformationWorkers Compensation Information
Classifications and Cross-References
Expand Risk Mgt. and Multiline InformationRisk Mgt. and Multiline Information
Expand Risk Finance InformationRisk Finance Information
Expand Construction InformationConstruction Information
Collapse Personal Lines InformationPersonal Lines Information
Collapse Free Personal Lines CommentaryFree Personal Lines Commentary
Expand Current Trends & IssuesCurrent Trends & Issues
Expand Personal Lines InsurancePersonal Lines Insurance
Collapse Personal Risk ManagementPersonal Risk Management
Insuring Residences Owned by a Trust, LLC, or Other Entity (May 2015)
Use Content To Serve Consumers as an Expert Resource (February 2015)
What Is Your Unique Value Proposition? (November 2014)
Personal Risk Management: Go Beyond the Product Pitch (August 2014)
Managing the Risks of Personal Injury from the Internet (May 2014)
Car Rental Risks and Protection Options (February 2014)
Biggert-Waters 2012 and the New Normal (November 2013)
Notable Coverages and Exclusions (August 2013)
Personal Lines Flood Coverage (May 2013)
Family Disaster Preparedness—Revisited (February 2013)
Personal Risk Management Services: More Than Just Insurance (November 2012)
Insurance as a Commodity? (August 2012)
10 Steps to a Well-Designed HO 6 Policy (July 2012)
Motor Home Liability Risk (June 2012)
Stand-Alone vs. Supported Personal Umbrella (March 2012)
Personal Umbrella Insurance 101 (February 2012)
The Insurance Audit (August 2011)
Homecare Workers: Managing Risks (June 2011)
Managing Groundwater Damage Risk (May 2011)
Comparing Stand-Alone Personal Umbrella Policies (April 2011)
Collision Damage Waivers When To Buy? (February 2011)
"Showhomes" Solve Home Vacancy Problem (June 2010)
Insuring "Zipcars" (April 2010)
Reducing Umbrella Risks by Having One Agent (March 2010)
An Alternative to Insurance as Usual (January 2010)
Personal Umbrella Coverage Checklist (September 2009)
Managing the Risks of a Vacant Home (July 2009)
Health Insurance Advice for the Newly Laid Off (June 2009)
Risk Management for Weddings (August 2008)
Choosing the Best Umbrella Policy: Case Study (May 2008)
Personal Insurance Risks Following Death (April 2008)
Time To Standardize Personal Umbrellas (February 2008)
Protecting Assets When Home Ownership Is Transferred (December 2007)
Insurance for the California Wildfires (November 2007)
Personal Umbrella Comparison Form (June 2007)
Managing the Risks of a Household Move (February 2007)
Townhouse/Condo Unit Owner Risk (August 2006)
Insurance Plan for the "Uninsurable" (March 2006)
Government Programs for Uninsurable Medical Conditions (February 2006)
Insurance Products for Uninsurable Medical Conditions (January 2006)
Make Good Group Insurance Decisions (September 2005)
Identity Theft (Part 1) (July 2005)
Identity Theft (Part 2) (August 2005)
Identity Theft (Part 3) (September 2005)
Making A World of Difference at Claim Time (June 2005)
Plugging Liability Insurance Gaps (February 2005)
Writing Your Own Newsletter (November 2004)
Senior Drivers and Insurance Concerns (October 2004)
Major Medical Risks Following a Job Change (July 2004)
The Nanny Risk (April 2004)
Personal Risk Management: An Overview (March 2004)
Family Disaster Planning (September 2003)
Cell Phone Bans for Drivers: Wise Legislation? (May 2003)
Expand Personal Lines Pilot Newsletter ArchivesPersonal Lines Pilot Newsletter Archives
Expand Claims, Caselaw, LegalClaims, Caselaw, Legal
Expand Insurance IndustryInsurance Industry
Expand Glossary of Insurance & Risk Management TermsGlossary of Insurance & Risk Management Terms
Expand SearchSearch
Terms of Use
Privacy Statement
System Requirements

Time To Standardize Personal Umbrella Insurance Policies

February 2008

Personal umbrella policies have been around for decades now—much like homeowners policies. But unlike homeowners policies, the insurance industry has failed to agree on standardized umbrella products so that agents and consumers alike know what they're buying.

by Jack Hungelmann
Corporate 4 Insurance Agency, Inc.

Over the years, umbrella policies have become more and more restrictive and more and more difficult to analyze and compare with the competition. In this article I make a case for standardizing these policies. I appeal to the insurance industry collaboratively or the National Association of Insurance Commissioners (NAIC) legislatively to create universal standardized umbrella policies so that both agents and consumers will know exactly what they are buying just by the policy form number (much like homeowners policies).

As an insurance agent specializing in personal insurance and risk management for individuals and small-business owners, part of my job is to help people manage personal risk. I have been studying and comparing personal umbrella policies for over 15 years now. I put the results into a spreadsheet so that I can more easily compare the coverages and limitations of each of the policies available to my clients. The most current spreadsheet, updated February 2008, includes the new 2006 ISO form, the addition of General Casualty's umbrella, plus Progressive's decision to offer excess Uninsured and Underinsured Motorists coverage.

If you look carefully, the most significant observation you will make is that there's absolutely no consistency from one umbrella policy to another, and that being able to compare the scope of coverage between umbrella policies is certainly beyond the capability of any consumer and even beyond the capability of most personal insurance agents. What this means is that consumers who buy personal umbrella policies are largely buying a "pig in a poke." They have absolutely no idea whether the policy they're buying is one of the better umbrella policies or one of the worst. Personal umbrella policies, unlike auto and homeowners policies for example, are largely unregulated in the scope of their coverage. And, unlike auto and homeowners policies, the insurance industry has not really created any universally adopted umbrella forms. Those that have been created by ISO and AAIS (i.e. Western National) aren't broad enough in scope of coverage to be recommended.

There are three reasons the consumer buys an umbrella policy:

  1. Additional liability coverage limits in excess of primary limits for the kinds of claims covered by the personal lines policies (auto, home, boat, etc.).

  2. Excess defense coverage for those same claims because the primary policy defense coverage only defends up to its policy limits. Suits for limits in excess of primary limits will necessitate retaining one's own attorney to defense the excess amount.

  3. A broader scope of coverage than underlying policies offer—in essence, covering many of the personal liability risks facing individuals that are not covered under underlying insurance policies. I refer to this broader coverage as "gap coverage."

Virtually all personal umbrella policies available today are extremely consistent in one way—they pretty much satisfy objectives 1 and 2 above. They provide excess liability coverage above the primary limits and provide excess defense coverage for the same type of claims covered by the primary policy.

The one area where there's actually no consistency is the scope of the gap coverage. Some umbrella policies provide virtually no broader coverage than is covered by primary policies. These are essentially straight excess policies. Most umbrella policies provide some gap coverage. There are only a small number of umbrella policies that provide coverage for most of the common exposures that consumers face not covered by their primary policies (the gaps). Vacation exposures—like renting vehicles abroad (U.S. auto policies typically provide coverage only within the United States and Canada) and liability for injuries and property damage caused when renting boats, snowmobiles, all terrain vehicles, etc.—are seldom covered by auto or homeowners policies. Or if, while renting these vacation vehicles, they are seriously damaged, rental agreements often hold the renters responsible for that damage. (Property in your custody is pretty much universally excluded under primary policies.)

Contractual liability risks are another problem, such as when a father signs a contract for his daughter's wedding reception, agreeing to indemnify the restaurant for any injuries to guests. Or, if alcohol is served at the reception, agreeing in the fine print of the rental agreement to defend and pay any judgment against the restaurant arising out of an automobile accident injury caused by a driver who had too much to drink at the reception. Consider also lawsuits for injuries to a coworker caused while driving a company-furnished vehicle. The lawsuit is neither covered by the company business auto policy nor the driver's personal auto policy, but can be covered by certain umbrella policies with no underlying insurance requirement.

Some consumers are kind enough to volunteer their services to nonprofit organizations, serving on a board of directors. Lawsuits against board members for injuries and property damage arising out of that service, such as injuries at the annual organization fundraiser, are not covered by underlying policies but can be covered by a good personal umbrella policy.

Homeowners policies often afford very little coverage for the regular business activities of children, such as newspaper delivery, baby-sitting, lawn mowing, etc. Umbrella policies can and often do pick up this exposure, at least up to certain age.

Some people have in-ground heating oil storage tanks. If the tank springs a leak, and the homeowner is sued for pollution cleanup expenses, they don't have coverage anywhere for that liability. A few umbrella policies provide coverage for that. Most do not.

Many states allow punitive damage awards. Although underlying policies often do cover those awards up to the policy limits, many umbrella policies do not provide excess coverage.

Standardizing Personal Umbrella Policies

The standardization of umbrella policies would help agents and consumers know the level of coverage they're buying. I suggest creating three umbrella forms in a format similar to that of homeowners insurance policies. They would look something like the following.

  1. UMB1 (Basic Form)—A straight excess policy that provides excess bodily injury, property damage, and personal injury coverages, if covered by the underlying insurance policies. One difference would be the addition of worldwide coverage.

  2. UMB2 (Broad Form)—A named-perils form covering liability for most of the activities that clients tend to get exposed to on occasion that aren't covered by a primary policy. This would include, for example, liability coverage for bodily injury and property damage claims arising out of:

    • the rental or borrowing of nonowned automobiles, watercraft, and recreational vehicles

    • damage caused to any of these nonowned vehicles/watercraft, subject to only the self-insured retention/deductible

    • contractual liability when the client/renter agrees to indemnify organizations in a contract when those organizations are sued as a result of that client's negligence (i.e., renting facilities or restaurants for wedding receptions, birthday parties, etc.)

    • sudden and accidental pollution liability (i.e., your underground home heating oil storage tank springs a leak)

    • automatic incidental premises liability for home offices to the extent covered by underlying insurance; services of directors and officers for nonprofit organizations

  3. UMB3 (Special Form)—The "all-risk" form covering any lawsuit other than a few exclusions like intentional acts, transmissions of communicable diseases, criminal activities, aircraft physical damage legal liability, or pollution liability from seepage that occurs over a long period of time (i.e., is not sudden and accidental). Nearly all other risks that appear on my comparison spreadsheet would not be excluded, and thereby covered, such as:

    • mold liability

    • aircraft vicarious liability coverage

    • coverage for fellow employee lawsuits when operating a company furnished car for regular use

    • business activities of minors, providing they don't earn more than $5,000 per year, for example, and don't have any employees

    • excess employers liability coverage for injuries caused to domestic workers, etc.

All three forms would include an option to add at least $1 million of excess uninsured and underinsured motorist coverage.


Doing an analysis and comparison of umbrella forms is very difficult and very time consuming, but until such time as the insurance industry develops standardized umbrella forms or state insurance departments force them to do so, insurance agents practicing risk management must perform these comparisons on their own.

Jack Hungelmann's book Insurance for Dummies, contains much of this information and is available at your favorite bookstore or online. For more information on his risk management and insurance business, go to where you can check out sample newsletters, brochures, other articles written on various issues. For background information, see Mr. Hungelmann's biography.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

© 2000-2015 International Risk Management Institute, Inc. (IRMI). All rights reserved.