Personal Umbrella Liability Policy
I have made the assumption (which has never been refuted) that a personal umbrella liability policy is basically an excess auto liability policy. Certainly this is true by loss figures overall, although I haven't been able to get specific data.
When I first learned of this type of policy, one of the strong points was the low premium. Also, it was supposed to be an advantage that I was getting it through a different company than my auto policy, as it would reduce the loss potential to the auto insurer in event of a major loss. This benefit has all but been eliminated by the companies and the regulators. In fact, the umbrella policy now requires a homeowners and / or auto policy. This being the case I do not understand why it is a separate policy.
As far as how premiums are derived, I fail to understand at all. Given the cost of liability coverage on a car, the cost of an umbrella liability policy for $1 million should be about $50. The reality is that this is being offered at the minimum $150 premium range. It also appears to be going up routinely. It must also be recognized that the liability coverage on your car may be call upon many times in the policy period but the coverage of the umbrella limits may only be used once and will not be "replenished".
I make the assumption that insurance is predicated on some form of science as opposed to merely gouging. I know that rate regulation and conduct of insurers is regulated by the various states. With all that being said I am having difficulty resolving this conflict in my mind.
Your personal liability policy (while it may be most often used in the case of car accident) will also cover you in the case of an accident or injury that occurs on your property. Actually, it covers you wherever you are: that's why it's called an umbrella policy. So, while most umbrella liability policies will come into play after a car accident, they will also protect you in case of an injury on your property, or at the cottage, or anywhere that you need more personal liability coverage.
For instance, if you have a pool, an umbrella liability policy is a must.
As for the issue of why it is a separate policy, it's because it covers you anywhere. That's why it is separate from your home or cottage or car policy. However, you do make a point that you could just increase your car or home or cottage policy with increased liability coverage. However, you will have to increase each of these policies separately if you want increased personal liability coverage across the board; that's where an umbrella policy can actually come in cheaper.