Only about 15% of households buy a personal umbrella—and the need for the protection is at least three times greater than that, according to Craig Kliethermes, executive vice president, operations at RLI Corp.
“People don’t buy enough of them,” says Bill Gatewood, associate vice president of excess casualty at Burns & Wilcox. “It is the most undersold insurance product we have out there.”
Considering a $1 million personal umbrella costs less than a dollar a day in most states and the total cost is usually less than 10% of a customer’s total personal lines insurance spend, Kliethermes says, a personal umbrella is an economical buy for most clients. So why aren’t more people buying them?
“They don’t know about it. Very few people are going to come walking in your office and say, ‘Can you sell me an umbrella please?’” Gatewood says. “It’s not compulsory. They don’t have a mortgagee forcing them to get an umbrella. They don’t have a state forcing them to get an umbrella. They don’t have a lender forcing them to get an umbrella.”
And that means if you want to sell more personal umbrellas, you have to push them hard. “What we’ve seen is that if an agent asks for the sale, the conversion rate is quite high,” Kliethermes says. “Nearly 50% of people actually buy [a personal umbrella] if they’re offered the coverage.”
Trying to sell a personal umbrella to a reluctant client? Here are three questions to ask to help drive home how crucial this coverage is for every personal lines client—no matter what their net worth.
Do you drive a car?
According to Kliethermes, six million car accidents occur each year—and about 75% of RLI’s personal umbrella claims are auto-related.
“If a person drives a car, they should be buying an umbrella,” says Mike Bradley, president and co-founder of PersonalUmbrella.com. “It’s just that simple. You could be the best driver in the world—it doesn’t mean someone isn’t going to run you over.”
That means everyone should consider securing uninsured/underinsured motorist (UM/UIM) coverage with their personal umbrella policy. Kliethermes notes that RLI estimates about 20% of the population consists of uninsured drivers, with an even higher percentage who are likely underinsured.
“The state minimum limits in a lot of states have not been increased in decades,” says Brett Woodward, senior vice president at NFP’s property-casualty division—which leaves a gaping exposure for many drivers.
“Most customers buy because they are worried about their personal liability if they cause an accident. They also need to be concerned about an uninsured or underinsured driver hitting them and permanently injuring them or putting them out of work,” Kliethermes points out. “Without adequate coverage, the accident victim will only recover whatever coverage the at-fault driver secured, which may not be enough coverage to pay for all medical bills, pain and suffering and permanent loss of income.”
Do you have friends, human or canine?
Any client who regularly invites a social circle to their home is at risk. “If you have parties at your house, you’ve exposed yourself to potential liability—and not just from serving alcohol,” Kliethermes says. “Guests could fall or get injured on the premises. We’ve seen instances where collapsed deck collapsed during a party and seriously injured guests.”
Another at-home risk? Certain pets. Kliethermes says about 40% of American households own a dog and 5 million people suffer from dog bites each year. “If you have a dog, you have a potential liability” that a personal umbrella can protect against, he says.
Gatewood says a coverage similar to UM/UIM is coming out on the homeowners side, where “if you are at someone’s house and their dog bites you, and you have $250,000 of medical insurance and they only have $100,000 on their liability, your umbrella will pick that up,” he says. “It’s kind of an uninsured property liability coverage.”
Do you rent anything?
Even if your clients don’t have a lot of assets, a personal umbrella could still be necessary coverage. “It’s not just for 1%ers,” Kliethermes says. “There is a growing segment of the population who just rents an apartment and maybe doesn’t own a car, and they think they don’t need coverage. But they still have potential exposure from renting.”
Have a hobby? You’re at risk. “You go out and play golf, hit somebody with a golf ball, knock them out and they’re out of work for six months and in the hospital for a month,” Bradley says. “That’s going to blow through your homeowners insurance. You don’t even have to drive a car. You just have to go out and do something.”
Renting itself presents an exposure, especially when it comes to equipment like RVs, watercrafts, snowmobiles, golf carts, Segways and even cars when traveling overseas.
“An umbrella will usually provide coverage for rentals,” Kliethermes says. “If you own or rent a swimming pool, a trampoline, a treehouse, a playset, an ATV, a boat, an RV or a WaveRunner, you need a personal umbrella.”
“If you have none of those things, you can probably get by without one, but then you can still get sued for slander if you offend somebody on the street,” Gatewood points out. “It’s not just for the rich. It’s not just for people in their 50s who have accumulated assets. It’s the thing that stands between you and a potential bankruptcy.”
Jacquelyn Connelly is IA senior editor.