What is Umbrella Insurance for Your Business?

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When choosing commercial insurance coverage for your business, it may feel challenging to find the right balance between how much insurance you need vs. how much your business can afford.

Commercial umbrella insurance may be the answer if you want to extend your policy's limits and increase your coverage. Here's how this policy works for your business.

What is Umbrella Insurance for Your Business?

Umbrella insurance is a unique type of insurance that extends the protections of existing policies, protecting you against the risk of claims or damages that exceed the limits of your policy.

Umbrella insurance is not a stand-alone business policy; rather, it complements and increases the limits of existing policies.

How Does Business Umbrella Insurance Work?

Imagine your business is sued when a customer is injured at your retail location. The customer's injuries are extensive, and you end up with a bill for $1.5M bill as a result.

Thank goodness you have a general liability insurance policy to cover third-party injuries and related legal expenses.

Unfortunately, your commercial liability policy has a $1M policy limit, meaning you still have to pay the remaining $500,000.00 out of your own pocket.

If you have umbrella insurance coverage, it is meant to kick in once you've reached the limit of your underlying liability policy. That extra $500,000 you needed beyond the liability insurance limits is covered, and you only have to pay your policy deductibles.

What Policies Does Umbrella Insurance Work With?

Commercial umbrella policies are intended to extend the limits of underlying liability policies, including:

  • Commercial general liability insurance
  • Commercial auto insurance
  • Hired and non-owned auto insurance
  • Employer liability insurance

Rather than extending the limits of each liability policy, you can protect them all against the risk of an extra-large claim with a single umbrella policy.

Five Things to Know About Umbrella Insurance

  1. Umbrella insurance is not a stand-alone policy. You can't buy this extended coverage without having another liability policy, such as general liability, employer's liability, or commercial auto.
  2. You may need to have a minimum amount of limits in place in the underlying policy before requesting an umbrella policy -- you probably won't get approved for a $1M umbrella policy if you only have a limit of $50,000 on the underlying coverage.
  3. Umbrella insurance for your business comes in $1M increments. Policy limits range from one million up to 15 million.
  4. Umbrella insurance is not intended to supplement Professional Liability (Errors and Omissions) insurance, and it is not intended to cover professional liability claims.
  5. Commercial umbrella insurance is not intended to cover commercial property damage, so ensure your commercial insurance policy has a limit that will cover the cost of your structure and the property (equipment, merchandise, furnishings, and inventory) stored inside.

Policy Takeaway

Commercial umbrella coverage offers protection against the risk of extra-large claims that go above and beyond the limits of your liability policies. To determine whether or not umbrella insurance is a smart move to protect your business, consult with an experienced licensed insurance professional. You can compare quotes and see how much coverage your business needs and can afford.

The point of commercial coverage is to protect your hard-earned assets in case of the unexpected; umbrella coverage is one way to ensure you're covered when the unexpected comes with an extra-large claim amount attached.

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