Brigham Cluff: If somebody buys a high limit liability policy, like a million dollar policy, does that mean that they’re automatically going to have UM and UIM coverage?
Derek Wilcock: No. In fact with any insurance policy sold here in Arizona for example, I’m sure it’s the same in other states, individuals have to sign off if they do not include that higher limit of UM, UIM uninsured, underinsured motorist coverage. It’s not automatically included, but if they do not get the same limit they need to sign off saying that “I reject it or want a lower limit.” Basically, they put it back on the insurance agent saying “Listen. You need to offer it. If you offer it and they don’t want it, they need to initial and sign off on it.”
Brigham Cluff: I have had cases where we have made them produce the proof of rejection of the coverage and they haven’t had the rejection proof. Therefore, the coverage is there. There is an extra premium that goes with that right?
Derek Wilcock: Correct.
Brigham Cluff: You do have to pay for that.
Derek Wilcock: Correct.
Brigham Cluff: How much extra, as a percentage, is that premium? Say you’ve got a million dollar liability policy, it costs x number of dollars. As a percentage of x, how much is your UM or UIM policy going to be on average?
Derek Wilcock: On your underlying limits, meaning your regular policy that you have, not the umbrella, the cost is minimal. When I say minimal, probably 5 to 10% overall the premium to have the same limits. When you get into an umbrella policy and you want the same limits, like a million dollar umbrella policy, you want a million uninsured, underinsured coverages as well, premium can get a little more expensive. In fact the percentage-wise I would say it’s 25%. In some cases higher. Some companies won’t even offer it. That’s another thing you have to find out. Make sure the company you’re going with will even offer those limits. Some of them restricted that, but there are a lot of companies out there. They are looking for the clients that need that coverage, so they offer it. That’s another thing to consider as well.
Brigham Cluff: Why wouldn’t a company offer that type of coverage?
Derek Wilcock: Either they’ve seen losses come through that are to the point of “You know what? It would be better off in our interest to take away that coverage or not even offer it, rather than to continue to pay out on it because of our losses.” That may be one reason. It all depends on the company and how they’re structured and their financial ratings and so forth.