Commercial Umbrella Insurance Explained

Umbrella insurance policies offer added liability coverage for property damages, lawsuits and injuries. They are a prime choice for many small businesses, which tend to be involved in at least some type of litigation annually. While you as a business owner may hope that this will not happen to you, it is always best to be prepared for all possibilities. Here, we dissect commercial umbrella insurance.

How Commercial Umbrella Insurance Works

Commercial umbrella insurance is also known as an excess liability policy. Generally, this form of insurance adds to your business’ existing general liability insurance. Should your underlying coverage be exhausted by a large claim, your commercial umbrella insurance will step in to cover the rest, up to the limit you have set. Commercial umbrella insurance can also cover legal fees incurred while you defend and/or settle your lawsuit, and might even be able to provide coverage not supported by your underlying policies.

What Commercial Umbrella Insurance Covers

Typically, commercial umbrella insurance covers the following:

• Commercial auto liability claims
• Defense costs
• Bodily injury and property damage liability claims
• Employers’ liability claims

What Commercial Umbrella Insurance does not Cover

Commercial umbrella insurance does have its limits, however, and the following are not typically covered by it:

• Mistakes caused by your advice or professional services
• Intentional bodily injury and/or property damage
• Damages to your business vehicles
• Damages to your business property

Do You Need Commercial Umbrella Insurance?

While it is not required that you possess commercial umbrella insurance, it is highly recommended. In the litigious society we live in, threats of lawsuits are ever-present. Whether or not the lawsuit is valid, defending your business against it can cause significant financial hardship if you are unprepared and caught by surprise. Here are a few things to consider when deciding what coverage is right for you:

• Do you have employees?
• Do you possess substantial assets that you would like to protect?
• Is your business open to the public or customers?
• Does your business require deliveries?
• Do your business’ marketing materials make any guarantees or promises?
• Do you have high net-worth clients?

Answering yes to any of the above questions may mean that you are more vulnerable to lawsuits than other businesses, given that you have a higher risk. To ensure that you do not face any unexpected out-of-pocket expenses, we recommend that you invest in a sound umbrella insurance policy. The good news is that umbrella insurance policies are not as expensive as you might think, given that they do not come into play until your underlying coverage has been exhausted. Typically, an umbrella insurance policy can cost you between $200 to $3000.

When it comes to selecting the right insurance for your business, you will want to be able to navigate the language of insurance policies, which can be a complex task. If you have difficulty weighing up your business’ requirements with the language of insurance policies, reach out to an expert. This is a large decision, and you want to be sure that you are adequately covered.