What's Happening With My Auto-Owners Insurance Umbrella Renewal?
In order to make sure your umbrella is as comprehensive and inclusive as we can, we have to add an additional liability policy for $105. Good news is, it gives you an $80-100 discount on the umbrella policy so it’s either nearly free, or very close and makes sure you have better protection.
Super long and detailed, “what the heck are we doing!?!?” explanation.
Background: Personal liability umbrella policies are set up to follow you around in your personal life, and step in to provide an additional layer of protection above your other policies, often $1,000,000 or $2,000,000, if something bad were to happen, you are at fault and liable to pay significant damages. Most umbrellas are “following form” umbrellas. When we say “following form” it just means the umbrella will only pay if there is another policy in front of them that pays the first $300,000 of loss. That simply means if your auto policy or homeowners policy, etc. denys or limits a liability claim you have, the umbrella policy will say, “sorry about your luck, we don’t have to pay because the other policy was supposed to pay first.”
There are only a few companies that currently even offer a “true” umbrella policy. When we say they are “true umbrella policy”, this means those that do not have the exclusion where they would deny coverage if the first policy that was supposed to pay excludes or limits your coverage. Auto-Owners Insurance is one of those few.
Because the Florida market has gotten pretty crazy, many homeowners companies over the past seven or eight years have added some major limitations or exclusions to their liability coverage on their homeowners policy. Common ones are things like a mold liability limit of $50,000. Or an animal liability exclusion or a limit of $25,000. Many have exclusions related to pools, such as liability for diving boards, pool, slides, or unfenced/unprotected pools. Some even have liability exclusions for bounce houses, trampolines, drones, or liability that is ‘cyber’ related. Point is, there are lots of potential big gaps in your liability protection provided by your homeowners and your umbrella if it is a “follow form” umbrella.
As a result of these homeowners limitations and exclusions, and because the Auto-Owners Insurance umbrella is so broad and inclusive, Auto-Owners Insurance has seen a lot of situations where their umbrella policy has had to pay an extra $300,000 when the home policy denies the claim.
In order for Auto-Owners Insurance to make sure that they are aware of the limitations and exclusions on people‘s primary residence insurance, they are now requiring that Auto-Owners Insurance provide the liability coverage for your primary residence. If they don't provide your liability coverage, they will still allow you to have the Auto-Owners Insurance Umbrella policy, but they are adding the “follow form” limitation to their umbrella policy. Meaning, they will not pay if your homeowners policy denies or limits a claim. This can be a major limitation or exclusion.
The good news is, Auto-Owners Insurance has made an exception to allow clients to keep the broad coverage even if they have a different homeowners insurance company, by allowing their clients to purchase a liability only policy from Auto-Owners Insurance. It means you don’t have to change your homeowners insurance, AND you can still keep the very broad level of coverage. What’s even better is the liability only policy is very cheap and generally only about $105-110 per year. EVEN better than that, in most cases there is a discount on the umbrella for purchasing that policy, which is $80-100. What that ultimately means for you is: for a net increase of $25 per year or less, you can keep the much broader, and better, policy language.
Because Auto-Owners Insurance doesn’t have a specific liability-only policy that they offer, what they are doing is allowing agents to set up a policy that is normally for a rental property, but we set it up as owner occupied, and we do not add physical damage coverage for structures on your premises. As a result, the only coverage that it provides is liability, which is the goal. That policy is called a “dwelling insurance policy”. It looks similar to a homeowners/renters policy, but you’d see the only coverages included are “Personal Liability” and “Medical Payments to Others”.
In most situations setting up, this particular policy is absolutely the right way to go, to give yourself the best chance of having the protection that you intended, if something bad happens.
If you own rental properties, in your personal name, there is a similar policy that we have to write to cover the rental liability and keep the “follow form” policy limitation from being added. That policy has a minimum premium of $435 per year. Each rental property is about $110 per year for $1 million of liability coverage. Meaning you can own up to 4 rentals and the price is the same, $435 per year. If you own more than 4 rentals, add $110 to the $435 minimum premium, for each rental property over 4 which you own. There is a little more nuance here than this, so talk with your agent about this, and the options you have, in detail if you have rentals.
As your umbrella policy renews, Auto-Owners Insurance will intermittently request an updated questionnaire to make sure they’re providing all the right coverages. When they do that, they will add the “Follow form” limitation unless we set up that Dwelling Insurance Policy (and rental liability policy if you have rentals). Below is a link to the questionnaire plus the liability only policy basics for the application. It will probably take about 10-15 minutes to complete, but it will allow us to help you make sure your umbrella policy has the best chance of protecting you if something bad were to happen.
As always, if you have any questions about this, please call/email/text and talk with an agent about your specific situation so we can help make sure you’re taken care of.