Commercial Umbrella insurance: an added layer of protection
Having an Umbrella insurance policy provides an extra layer of protection in the sort of catastrophic event with damages that exceed your property and liability policies coverage limits.
Umbrella policies are also available for business owners and buying an Umbrella policy for your business — also known as a Commercial Umbrella policy — could make sense.
How does a business Umbrella policy work?
A Commercial Umbrella policy can cover claims — single claims or multiple smaller claims for a single incident — that are more than the coverage limits included in your underlying policies. Let’s say, for instance, you operate a food truck that has a grease fire. There’s damage to your truck and a nearby office building, as well as some injuries to a customer.
Your Commercial Property insurance will cover the damages to your own equipment (up to the limits you’ve purchased). The damage to others’ property (the office building) and others’ medical bills (for the injured customer) are covered by your commercial liability insurance.
But what if your liability coverages cap at $1 million and there is $2 million worth of damage and medical bills to pay for? You’re on the hook for the remaining million dollars unless you have an Umbrella policy that will kick in to cover that shortfall. Commercial Umbrella is a cost-effective way to protect your business, especially when a single adverse judgement could mean shutting your doors for good.
First, take stock of the commercial liability coverages you have
Talk with your insurance agent to be sure you’re appropriately covered in your underlying liability policies. There are several types of liability policies that businesses can buy in addition to General Liability.
- Directors and Officers: Helps cover defense costs and damages if claims are made against the business’ leadership.
- Errors and Omissions: Helps cover costs associated with mistakes made by your business.
- Fire: If you rent or lease your space, this coverage which will help cover you in the event you’re found responsible for a blaze.
- Liquor: If you run a bar or restaurant that serves alcohol, this helps insure the business against injury claims as the result of beverages served during normal business hours.
- Employment Practices: Helps protect your business against lawsuits filed by employees.
And what about your Commercial Property insurance? Does it cover everything you think it does? Unless you’ve carefully read your policy, you may find that it doesn’t. Ask your agent to explain what it will — and more importantly won’t — cover.
How much Umbrella coverage is necessary?
The amount of coverage you need in a Commercial Umbrella policy depends on what kind of business you run.
If you’re a sole proprietor with no employees, working out of your home, without direct contact with customers or the need to hire contractors, your liability exposure is minimal.
But most businesses have at least some exposure and many have large exposures (think daycares, private gyms, or restaurants). Some things to think about:
- Does your business deal with customers in person? The more direct contact with customers your business has, the greater your company’s liability risk, and the more benefit it might derive from an Umbrella policy.
- Do your employees use heavy or dangerous equipment on the job? Commercial Umbrella insurance can help cover severe injuries or deaths.
- Do you use vehicles to conduct your business? You can’t rely on your own or your employees’ personal auto insurance policies to extend the protections you need. You probably have a Commercial Auto policy, but you still might benefit from the increased liability coverage an Umbrella policy will give you.
Your agent can help you figure out how much coverage you need for your business.
Know your policy’s limits
There are things a Commercial Umbrella policy won’t cover. It’s meant to provide additional coverage, not general coverage. Also, Commercial Umbrella coverage is not a replacement for General Liability insurance.
And, if you already have an Excess Liability policy in place, don’t assume you don’t need an Umbrella policy. These policies add protection for a single underlying liability policy, while an Umbrella policy can cover several.
Sources: Forbes Advisor, Nerdwallet.com
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10/2023