What business owners should know about commercial umbrella insurance

Commercial umbrella insurance fills in the gaps between your other business policies – and extends their coverage.

Your business insurance policies have the same purpose: they compensate you in the event of a financial loss.

As a business owner, you should not overlook the importance of insurance coverage. Accidents happen no matter how carefully you manage your business. Insurance premiums might be expensive, but the out-of-pocket payments associated with lawsuits can bankrupt your company.

Aside from general liability insurance, employer’s liability insurance, product liability insurance, and business auto liability insurance, you should also consider commercial umbrella insurance.

For example, if your company is found accountable for a customer’s injury at work and is sued for $1.5 million but only has $1 million in liability coverage,, a commercial umbrella insurance could pay the $500,000 deficit, pursuant to the policy’s liability coverage.

What are the advantages of business umbrella insurance for employers?

Every employer should have employer’s liability insurance, for example. If an employee is injured (or multiple employees injured from an accident, for example), it is very easy for the claim to exceed your coverage limits. Umbrella insurance is excess coverage – it takes over when your primary coverage is used up.

When you buy insurance for employer’s liability, you probably think about one person slipping and falling in the break room. But what happens if there is a fire and several employees are injured? What happens if several employees are traveling for business and there is an accident? In these cases, it is very easy for your primary insurance to be used up. This is where umbrella insurance kicks in and covers you.

Umbrella insurance is for those big, catastrophic losses that would be too expensive to insure otherwise.

What is covered by commercial umbrella insurance?

Commercial umbrella insurance can cover some types of liability insurance by extending primary business insurance plans. It could help to protect your company from massive liability claims and catastrophic losses caused by:

  • Legal and medical costs when someone is harmed on your company’s property
  • Employees lawsuit expenses resulting from work-related injuries
  • Car accident charges that exceed the limitations of your commercial auto coverage
  • Judgments and settlements from advertising injuries, such as litigation with your competitor’s about their unfair business practices

Umbrella policies will “fill the gaps” for coverage you do not already have. For example, your insurance policies typically cover your operations in the United States, but any injury that occurs outside the US would not be covered by your standard policies. Umbrella insurance would cover you in the event of a loss internationally.

What Is Not Covered By Commercial Umbrella Insurance?

Commercial umbrella insurance does not cover all kinds of claims.

When you buy an umbrella policy, the policy will detail what kinds of risks are covered by the umbrella – and what risks are not covered.

In most cases, your umbrella will list your existing polices and your umbrella will often be “excess coverage” on those listed policies. (“Excess coverage” means your umbrella will kick in once those other policies are used up.)

If one of your existing policies is not listed on your umbrella, the umbrella policy will *not* act as excess coverage.

Also, be careful to note what is covered and not covered under your umbrella. Many umbrella policies will “fill in the gaps” between your other policies, but at a lower limit than other situations.

Who should consider purchasing commercial umbrella insurance?

Every firm benefits from commercial umbrella insurance. When things go bad, they often go very bad. That is where the umbrella policy is good to have.

Because umbrella policies are designed for only very rare risks (like if you exceed the limits of your employer liability policy), the cost of an umbrella policy is much lower than your primary insurance. From a business perspective, this coverage is for catastrophic events, but very affordable.

When would a commercial umbrella insurance policy benefit my company?

General liability insurance

  • Small business – You have a crowded storefront and want to protect yourself from the expensive costs of a consumer injury lawsuit.
  • Freelancer – Before you would work with your client’s pricey technology, the client requests that you extend your insurance limit in case you damage it.
  • Home business – A corporation sues you for copyright infringement, and the damages exceed your policy limit.

Commercial auto insurance

  • Small business – Your company has a fleet of vehicles, and the expense of a few minor accidents could exceed your policy’s basic limits.
  • Freelancer  – You are on your way to see a client when you are involved in an accident, and the property damage exceeds your standard insurance maximum.
  • Home business – Your company’s car is involved in an accident, someone is hurt, and the medical bills exceed the insurance limit.

Options for commercial liability insurance

Aside from commercial umbrella insurance, there are a variety of alternative endorsements that may be suited for your company’s needs, such as:

  • Liability coverage for hired and non-owned vehicles, This covers auto liability when employees rent or use their personal vehicles for corporate purposes.
  • Directors and officers liability insurance,  which pays for a director’s or officer’s legal fees and damages
  • Fire legal liability insurance, This protects you if you are judged accountable for a fire in the space you rent or lease.
  • Employment practices liability insurance, which provides defense against employee lawsuits.

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