Mid-Term Limit Increases

By Becca Cole, Associate Account Executive

Occasionally insureds have a contract requiring higher limits than they currently carry.  Sometimes, they are interested in raising their full policy limit to meet the requirement and provide higher limits for future jobs, but often it may be more practical to provide the higher limits required on a project specific basis. For example, if one particular job is requiring an $8M aggregate, an insured who feels comfortable carrying a $2M policy aggregate generally may not see the need to increase their full policy limit so much for an out-of-the-ordinary requirement.

There are advantages and disadvantages to both types of increase. Raising the full policy limits means that any future project requirements for higher limits may already be met and the increased limits would be available for any covered claims regardless of what project they are associated with. However, the pricing for the increase will be based on the insured’s full revenues and operations, so the endorsement will typically be more expensive. Alternately, endorsing higher limits for just one project will not meet requirements for future projects, and will not provide higher limits should any other claim arise unrelated to the designated project. It should be noted that the rating for the endorsement is based solely on the exposure for the one project, so pricing is often much lower, especially for insureds with larger operations and revenues.

It is often worth quoting options for both a policy increase and a project-specific increase, especially if the insured’s policy is already at minimum premium.  If the revenues for the job and for the insured’s total operations both fall below minimum premium for the higher limit, the pricing for the endorsement may be the same for each option. In that case, it would generally make sense to increase the full policy limits and provide more coverage for all operations.

In order to determine the pricing for a project-specific limit increase, we will need to know the following:

  • Project name and location
  • Project revenues for project
  • Project scope of work
  • Limit requirements (including which coverage parts need an increase)
  • Expected project duration

Please contact our service department if you have any questions about mid-term limit increases.