Part of the Insurance Warehouse Coverage Explained series: what each piece of an association’s insurance program does, in plain English.
The general liability policy usually carries a $1,000,000 limit per occurrence. That number has not changed in decades while jury awards and medical costs have. An umbrella policy sits above the general liability, the D&O and any auto liability the association carries, and adds another layer of limit, most often $5,000,000 or more. It is the least expensive million of coverage an association buys.
Why associations buy it
- Pools, playgrounds and ponds. A drowning or a serious injury can exceed $1,000,000 quickly.
- Walkways in winter. A fall on ice that leads to surgery is a six-figure claim before lost wages are counted.
- Lenders and property managers often require an umbrella as a condition of financing or of managing the community.
- The price. Because it only pays after the primary policy is exhausted, an umbrella costs far less per million than the policy beneath it.
How it works with the other policies
The umbrella responds after the underlying policy pays its full limit. If a claim settles for $3,000,000 and general liability pays $1,000,000, the umbrella pays the remaining $2,000,000. On most association programs it also sits over D&O, so a large claim about a board decision is covered the same way. The umbrella needs the underlying policies to be in place at the limits it requires; if they are not, the association pays the difference.
How much umbrella, and what it costs
- $5,000,000 is the common limit for associations and what most lenders and managers ask for. Communities with a pool, a pond or a large clubhouse often carry more.
- Each added million costs less than the one before it. The first million above general liability is the most expensive layer; the fifth is a fraction of that.
- Units, amenities and losses set the price. A 40-unit townhome community with no amenities pays very little. A 300-unit community with a pool and playground pays more, and still far less than the exposure.
Where the gaps hide
- An underlying policy that is not listed. If D&O or hired and non-owned auto is missing from the umbrella’s schedule, a large claim on that line stops at the primary limit.
- An amenity the carrier does not know about. A new spa, slide or diving board added mid-year changes the price and, undisclosed, can change the coverage.
- Exclusions that do not match. Not every umbrella follows the wording of the policy beneath it. Ask what the umbrella excludes that the general liability does not.
Before your next renewal, check that
Tap or click a box to tick it off as you walk. The boxes reset when the page is reloaded, so print the PDF at the end if you want a record.
Not sure what your policy says?
Send us your current declarations page and we will review it with you. The Coverage Double Check is free and there is no obligation.