Thank you. That is great information.jwhitaker wrote:I'm an actuary. So you guys are right. The average loss is going to be really large, not necessarily the full limit but call it one million. So if you pay a few hundred and assume the "loss ratio" of the company is 20% to 50%, then the frequency will be on the order of one in ten thousand. It's not a bad deal and you should probably have coverage. Umbrella insurance is not a scam. Pet insurance, consumer product warranty ($20 to insure a $100 microwave) and title insurance, those are the scams. Title insurance has a 1% loss ratio, meaning when you buy your house and pay $1000 for title insurance, there is an expected insurance loss of $10. Now you might say, "oh but they investigate the property, yada yada". Well there's a 90% commission going out the door, so not much leftover to pay MacGyver. That's compared to maybe 15% to 20% to your agent for other types of insurance. The loss ratio on umbrella really is in that 20% to 50% range. So it's higher profit margin than your homeowners or auto (those are more like 60%+) but it's reasonable.
Since you're an "insider," I have a question for you. If a person has $2M in umbrella coverage, but only $1M in awardable assets (i.e. assets that a judge could award in a lawsuit), is the insurance company at risk of a $2M payout or only a $1M payout?