Price higher liability limits from a basic-limits premium with increased limits factors (ILFs), and see the cost of each additional layer.
How the increased limits factor calculator works
Liability rates are usually developed for a basic limit. Increased limits factors scale the premium for higher limits. Because the chance of a loss reaching a higher layer is small, each extra dollar of limit costs less than the one before it.
Formula
Premium at limit L = Basic-limits premium × ILF(L). Cost per $1,000 of added limit = ΔPremium ÷ (ΔLimit ÷ 1,000).
How to use it
Enter the premium at the basic limit.
List each limit option and its ILF.
Compare the added cost of each step up.
Worked example
A $4,800 basic premium with an ILF of 1.67 for $1M costs $8,016. Going from $500K to $1M adds $864, or $1.73 per $1,000 of extra limit.
Frequently asked questions
Where do ILFs come from?
From the carrier’s filed rating manual or ISO’s published tables for the line and class.
Why does the cost per $1,000 fall at higher limits?
Large losses are rarer, so the expected loss in each higher layer is smaller.
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