Endorsements & LiabilityQuestion 99 of 158
An applicant for a Personal Umbrella Policy has $50,000/$100,000 auto bodily injury limits and a $100,000 HO Coverage E limit. The umbrella insurer requires $250,000/$500,000 auto and $300,000 HO E underlying. What is the MOST likely underwriting outcome?
a.The umbrella will be issued and will fill the gap below as primary coverage
b.The umbrella will be issued at no extra cost because the underlying limits do not matter
c.The applicant must either raise the underlying auto and HO liability limits to meet the umbrella's required underlying limits, or accept a self-insured retention equal to the gap, before the umbrella will be issued
d.The umbrella will automatically reduce its own limit to match the underlying limit
Explanation
Umbrella underwriting requires that the insured carry specified MINIMUM underlying liability limits. If the applicant's underlying limits are below the umbrella carrier's requirement, the insurer will either decline, require the insured to increase the underlying limits, or in some cases require the insured to accept a self-insured retention (SIR) equal to the shortfall. The umbrella does not act as primary for the gap unless specifically structured to drop down.
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