Our Personal Liability Umbrella Policy just went up 76%. Here’s the State Farm explanation.

Inflation is a problem. Prices are rising. I know this.

Still, it was a big shock when I opened up a renewal certificate from State Farm insurance recently and saw that our Personal Liability Umbrella Policy would cost 76% more than last year.

Wow. That didn’t seem like inflation to me. It seemed like highway (well, insurance) robbery. So I phoned our State Farm agent and asked for an explanation.

The agent also was shocked, since he isn’t the one who sets State Farm rates. He said that quite a few of his clients have been complaining about the increased cost of their own umbrella policies.

Which Google AI describes as: “an extra layer of liability insurance that kicks in when the limits on your standard policies—like auto, homeowners, or boat insurance—are completely used up.”

Well, that’s the way things are supposed to work.

But our agent told me that increasingly, Personal Liability Umbrella Policies are being used as the first source of payment, not an extra source. Supposedly if an attorney learns that someone has such a policy, they go after it. Often State Farm settles the case instead of having it go to trial.

I expressed dismay, saying that this just encourages attorneys to seek large unjustified awards from State Farm, which makes it more likely that umbrella policies will be misused in the future.

Google AI told me something roughly similar when I asked why the cost of Personal Liability Umbrella Policies is increasing so much.

• Nuclear Verdicts: Juries increasingly award multi-million dollar settlements that easily exceed standard auto or home limits.
• Social Inflation: Aggressive legal tactics and higher compensation expectations drive up the cost of settling claims.
• Auto Severity: Advanced vehicle technology and distracted driving make modern car crashes far more expensive to resolve.
• Medical Inflation: The surging cost of emergency care and surgeries directly inflates bodily injury payouts.
• Insolvent Loss Ratios: Insurers are paying out far more in claims than they collect in premiums, forcing steep recalibrations.

Our State Farm agent told me that fairly frequently people have had a Personal Liability Umbrella Policy for a long time, but it was never used. Then the markedly increased cost of the policy leads them to cancel it — just before they need it for a large claim.

One reason we’re going to stick with our Personal Liability Umbrella Policy, even though the cost of it is so much higher, is that our policy has Uninsured and Underinsured Motor Vehicle coverage “grandfathered” in. Meaning, State Farm doesn’t offer this anymore, but since we already have it, we can keep it.

If we went with a different insurance company to save money, likely we’d have to drop the Uninsured and Underinsured Motor Vehicle coverage. That coverage, I was told, is the most valuable part of our umbrella policy, as Google AI observed:

While base umbrella liability gets cheaper per million, UM/UIM rates remain relatively flat or scale faster because the likelihood of a major medical claim from a car accident is statistically much higher than a massive third-party lawsuit.

After asking me several questions, Google AI concluded that as steep as the rate increase was from State Farm, what we’re paying on the umbrella policy for both Personal Liability and Uninsured and Underinsured Motor Vehicle coverage is within the ballpark of comparable rates from other insurance companies.

So I’m still irritated at the 76% rate increase. But we’re going to remain with State Farm because changing insurers would be more trouble than it’s worth.