The Importance Of Umbrella Insurance Policy

IN THIS BLOG

The Ability of Umbrella Insurance To Protect You

What You Need To Know About The Umbrella Insurance Cost

Do You Need Umbrella Insurance?

Common Reasons To Obtain an Umbrella Policy

The Purpose of Umbrella Coverage

Who Should Consider an Umbrella Insurance Policy?

Other Benefits of Umbrella Insurance Coverage

Do you need an umbrella insurance policy? Today’s business owner needs to consider the frequently rising costs of lawsuits and judgments. Because it could potentially be harmful to their business, a devastating liability loss can happen to any company at any time. Also, a commercial umbrella policy protects you if those losses exceed your basic liability coverage.

The Ability of Umbrella Insurance To Protect You

As a business owner, you know all too well that one unforeseen event could destroy the business that you’ve invested your time and effort to build. While an Umbrella policy is helpful for individuals, it’s imperative for business. Commercial Umbrella helps you protect your assets by providing liability limits above and beyond your other insurance policies.
An Umbrella policy is a form of additional liability protection that kicks in after your Business or Commercial Auto Liability protection has been exhausted following a claim. Your Umbrella coverage is distinct from these policies, and it builds onto both of them as an additional safeguard. Since the underlying policies will pay out first, you can usually add coverage very inexpensively, making it well worth the investment.

What You Need To Know About The Umbrella Insurance Cost

Depending on the type of business you operate, you may experience higher limits. For example, companies with high loss potential, high profile, sizable sales, numerous assets, large auto fleets, worldwide presence, and significant public exposure may require more substantial coverage. The cost of umbrella insurance to purchase is eventually a business choice. It is impossible to have all-out foresight into every single risk that a business may confront. To properly evaluate the measure of umbrella insurance to get, consider the risk exposures that are regular to your industry.

Do You Need Umbrella Insurance?

Umbrella insurance provides an extra layer of protection if you’re held responsible for injuring someone or damaging their property. An umbrella policy can offer coverage if you incur claim expenses that exceed the limits for your homeowners, auto, or other personal liability insurance policies.

Common Reasons To Obtain an Umbrella Policy

  • Have significant savings or other assets.
  • You want to protect against potential losses of income.
  • Owned property (especially investment property).
  • You have a business
  • You are a landlord.
  • Participates in activities that could easily injure others (e.g., skiing or surfing).
  • Own items, property, or pets that can lead to injury lawsuits (e.g., pools, trampolines, guns, or specific dog breeds).
  • Have inexperienced drivers in your household.

The Purpose of Umbrella Coverage

Umbrella coverage protects an organization against monumental liability claims that can demolish a business through a significant financial judgment. Typically, an umbrella policy serves the following purposes:
  • Provides coverage for potential damages and court defense fees that exceed underlying insurance policies.
  • Provides coverage in situations not covered by underlying insurance policies but are not excluded from the umbrella policy. This benefit is subject to a self-insured retention (SIR), similar to a deductible in which the policyholder is responsible for losses up to the SIR amount. 
  • When the underlying policy’s aggregate limit has reached, this applies. The umbrella policy will cover the portion of the claim that claims cannot pay with the underlying policy because insufficient funds are available to cover the entire claim.

Who Should Consider an Umbrella Insurance Policy?

All types of companies would benefit primarily from Umbrella Insurance. Many choose to pay the extra price because it extends coverage dramatically at a relatively small additional cost. The amount of coverage needed will always depend on the total value of your assets. Here’s how it works:
Assume a jury ordered your business to pay $3 million in damages for a liability claim, but your general liability policy has a $2 million limit. Your company would generally be required to cover the additional $1 million. However, with a $4 million Umbrella Insurance policy, the $2 million commercial policy would exhaust, and then the umbrella policy would cover the outstanding $1 million.

Other Benefits of Umbrella Insurance Coverage

Ultimately, Umbrella Insurance acts as a sort of dual policy, providing coverage in two ways:
  • Paying liabilities above existing policy limits
  • Providing coverage in areas not included with existing policies
Umbrella Insurance Policy is also beneficial because an effective policy can save your business money and cover more assets by using fewer individual policies. However, some coverage may be excluded under your Umbrella Insurance Policy, depending on your policy. Standard exclusions include employment practices liability, professional liability, and product recall coverage.