Business umbrella insurance
CoverLink Staff No Comments

You’ve worked your entire career to turn your passion into the successful business it is today… so the question is, can you afford NOT to have Umbrella Insurance?

Statistics will show that very few businesses ever experience a claim that results in millions in damages.

But, for those that do experience such an unfortunate accident or claim, often Umbrella Insurance is necessary to protect their assets, and keep their business in operation.

You might be saying ‘but I have a Commercial General Liability (CGL) Insurance Policy, so I should be covered, right?’

Yes, your CGL policy covers claims, lawsuits and medical expenses up to its limits of liability.

However, what happens when those medical costs far exceed your limits of liability

If you don’t have an Umbrella Insurance policy, then your business would be responsible for paying those additional expenses, and they could become extremely costly.

Why you should protect your business with an Umbrella Insurance Policy

In a culture where litigation is commonplace, business owners have many more worries than making profits and retaining top employees.

If your product injures a consumer, your organization could face a devastating lawsuit, exponential damages, and a tainted reputation in the marketplace.

To assist with the financial burden of a claim, many business owners purchase Commercial Umbrella Insurance on top of their standard CGL policy.

Most CGL policies have an aggregate limit that, once exhausted, will not cover any other excess claims.

An Umbrella Policy would simply provide an additional layer of protection for the excess claims, preventing you and your business from paying the additional costs of the claim.

Experienced business professionals understand that the litigious nature of our society, combined with surmounting liability judgments, are reason enough to purchase additional coverage.

Over the years, courts have reached numerous multimillion-dollar verdicts as the result of the following types of claims:

  • a grain elevator explosion in which an individual suffered severe burns
  • the use of a chemical inaccurately labeled as animal feed in which thousands of livestock died
  • a commercial truck caused an accident in which many people lost their lives

What is an Umbrella Insurance Policy?

An Umbrella Policy serves two purposes.

  1. It provides excess liability coverage over the scheduled underlying policies.
  2. It fills some gaps in the underlying coverage.

There is no standard Umbrella Policy. Therefore, a thorough coverage comparison is a must.

Key areas of comparison are exclusions, deductibles, whether a follow-form is offered over unusual underlying exposures, limits, and defense cost (inside or outside of the limits).

Businesses with an auto exposure (you own a fleet of vehicles your employees use on a daily basis) should carry either an Umbrella or an excess liability policy because of the potential for catastrophic loss in a major accident.

Purpose of Umbrella Coverage

An Umbrella Liability policy provides an insured with an “umbrella” of liability protection over the primarily liability insurance policies.

The coverage is designed to protect an organization against massive liability claims that can destroy a business through a large financial judgment.

Typically, an umbrella policy serves the following purposes:

  • Provides coverage for potential damages and defense costs that exceed underlying insurance policies (typically CGL and Commercial Auto policies).
  • Provides coverage in situations that are not covered by underlying insurance policies, but aren’t excluded from the Umbrella Policy. This benefit is subject to a self-insured retention (SIR), similar to a deductible, in which the policy holder is responsible for losses up to the SIR amount.
  • Applies to claims where the aggregate limit of the underlying policy has been met. The Umbrella Policy will cover the portion of the claim that cannot be paid with the underlying policy because there aren’t enough funds available in the policy to cover the entire claim. For instance, if at the time of a claim, your CGL policy has $500,000 remaining and the claim in question is $1.5 million, then the CGL policy will cover $500,000 and then the Umbrella Policy will cover the remaining $1 million.

Customize your Umbrella Policy to fit your business

It’s important to understand that all Umbrella Policies ARE NOT created equal.  Since there’s no standard form of coverage, each insurance company can have its own variations in terms of what they cover, and what’s excluded.

And depending on your industry, you very likely have different needs with your Umbrella Policy.

For example, owners of an auto body shop might need an Umbrella Policy to offer expanded coverage for garage liability, but a law firm might need additional liability coverage to protect the professional advice they’re providing their clients.

We can help

Don’t allow a high-cost accident or lawsuit put your company out of business. An Umbrella Insurance Policy will provide you an additional layer of liability protection so you can have peace of mind in the face of a catastrophic claim.

Looking for Personal Umbrella Insurance?

We can help with that too. A Personal Umbrella Policy works much the same as the Business Umbrella Policy, but instead of providing additional coverage over CGL or Commercial Auto policies, it provides excess coverage over Homeowners and Personal Auto policies.

Contact one of our Licensed Insurance Advisors today, or Request a Proposal to get started immediately. We can discuss what specific needs your business may have, and customize a policy to meet those needs.