Six Things to Know About Umbrella Insurance

From rising courtroom verdicts to notable underwriting shifts, here are six things independent agents and brokers need to understand about today’s umbrella market.

What Is an Umbrella Policy?

An umbrella liability policy is designed to pick up where underlying liability insurance policies leave off.

This could mean that once the underlying coverage is exhausted due to the payment of a claim, the umbrella policy can begin to pay on the balance that is owed to the claimant. It could also mean that the loss was excluded on the underlying liability policy, and the umbrella can pick up coverage because there is no exclusion for the loss.

Patrick Wraight, director of education at Insurance Journal’s Academy of Insurance, shared that an umbrella policy, especially one issued by a different company than the one that issued the underlying coverages, might have different coverage terms, conditions, and exclusions than those underlying liability policies.

By comparison, an excess liability policy is like an umbrella in that it picks up where those underlying policies cease making payments, but it is designed to pay claims in the same way that the underlying policies pay the claim.

Pressure on Umbrella Pricing Remains

The broader commercial insurance market may be experiencing increased capacity, but umbrella pricing remains strained. In some cases, $2 million or $3 million is replacing the traditional $5 million lead umbrella layer.

When unpacking this trend, Society Insurance, a mutual insurance company based in Wisconsin, pointed to third-party litigation funding and social inflation–both of which are increasing the severity of claims.

Data from Marathon Strategies shows that jury awards exceeding $10 million (and even $100 million) are becoming more common, with a 27% increase in nuclear verdicts from 2022 to 2023. And all the while, carrier capacity is being managed more conservatively, with many insurers reducing the limits they’re willing to offer.

How Underwriting Has Changed

Society Insurance reports that umbrella policy underwriting has become more selective and data driven. Carriers are placing greater scrutiny on loss history, safety protocols, and risk management practices, and insurers are deploying smaller, more targeted layers where multiple carriers participate–instead of offering large, single-layer limits.

Insurers are also pushing for higher underlying limits before umbrella coverage kicks in. Agents should be prepared to educate clients on these shifts and help them present their risk in the best possible light, Society advises. This includes emphasizing proactive safety measures, staff training, and claims history transparency.

Why Carrier Financial Strength Matters

Concentrating solely on the contractual language of a commercial umbrella policy is a misstep, according to Chris Longo, CEO and managing director of McGowan Excess & Casualty. Speaking during an Academy of Insurance webinar, Longo emphasized a point that still rings true today: the importance of evaluating a carrier’s financial strength and claims-handling experience.

“So, the financial strength of the carrier, you want them to be around for many years so that they can pay umbrella claims,” Longo said. “You want to make sure that they have the ability to pay as well as handle umbrella claims,” he said, adding that their experience in the umbrella marketplace is important, too.

Securing an umbrella policy with a carrier that doesn’t have experience in handling large, severe claims could present problems. Longo stressed that insurers must be prepared to defend those claims competently.

He pointed to AM Best ratings as the industry’s most common reference point for financial strength.

Reshaping How Personal Lines Clients Think About Liability

It’s a simple truth: Many personal lines clients with limited assets don’t see the need for umbrella insurance.

Marjorie Segale, president and founder of Segale Consulting Services and vice president of education and founder for Insurance Community Center, saw this firsthand as an agent. In a webinar with the Academy of Insurance, she stressed the importance of helping clients understand that it isn’t about their personal worth.

“It’s the amount of damages that another party can claim against your client that gives rise to the need for this policy,” she said. “It is critical.”

Many umbrella policies are narrowly crafted to follow what is being provided in a particular homeowners or auto policy, and the forms vary, Segale said. Because client exposures shape coverage options, agents and brokers must understand those risks to offer the right product and select the right carrier.

Commercial Umbrella Outlook

According to USI Insurance Service’s recently released 2025 Commercial Property & Casualty Mid-Year Addendum, umbrella and excess rates for middle-

market buyers are expected to be flat to up 10% in the next six months, while risk management buyers can anticipate increases of up to 20%, depending on prior loss history and class of business.

The insurance brokerage and consulting firm reported that umbrella and excess liability lines capacity remains adequate and that rate increases are generally stabilizing for most insureds. USI’s addendum said that social inflation remains a persistent challenge for liability lines as social dynamics continue to evolve.

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