Umbrella liability insurance is one of the most important types of insurance your business can purchase. The number of lawsuits filed against businesses and the size of the settlements are on the rise.
You have established policies and procedures, a strong safety program. You comply with OSHA and all other regulatory requirements of your industry. You have a great team of employees and are conscientious at all levels of your business operation but it still happens….mistakes are made, accidents occur, property is damaged, and people are injured
Chances are the amount of liability protection from your base liability policies – general liability, commercial auto, employer’s liability, liquor liability, etc. – may not provide enough financial protection when the unthinkable occurs. This can leave your business open to risk and make your assets vulnerable.
Who Should Consider an Umbrella?
Every business would benefit to include an Umbrella policy in their liability insurance program because it extends significant coverage at a relatively small additional cost.
How Much is Enough?
It is impossible to predict the amount that might be awarded to the winning party of a lawsuit – an amount that your business would be responsible for paying – as there are just too many variables. When people are injured, the number of injured parties, their age, extent of injuries, impact on their wage earning ability, etc. are all factors. If there is damage to property of others, the value of the damaged property and the financial impact on the property owner and tenants are contributing factors.
Factors that you should take into consideration when trying to determine the amount of Umbrella coverage that your business should secure include the nature of your business, your exposure to potential catastrophic loss, number of employees, total of your assets, contractual obligations, etc.
Are all Umbrella Forms the Same?
Umbrella forms can vary from carrier to carrier. Some offer broader coverage for situations that are not covered by underlying base insurance policies. This benefit is subject to a self-insured retention (SIR), similar to a deductible, in which your business would be responsible for losses up to the SIR amount
Some provide the limit individually over each underlying policy versus collectively in essence providing an individual umbrella over each underlying policy. Because of these and other form variations, It is important to carefully select the right carrier and policy form for your business needs.
How does an Umbrella respond at the time of a claim?
An umbrella policy provides coverage for damages and court defense fees that exceed underlying insurance policies. For example, assume a jury ordered your business to pay $3,000,000 in damages for a general liability claim, but your general liability policy only has a $1,000,000 limit. Your business would be required to cover the additional $2,000,000. However, if you also purchased at least a $2,000,000 umbrella policy, the $1,000,000 general liability policy would exhaust, and then your umbrella would cover the outstanding $2,000,000 preventing you from having to liquidate and utilize assets or secure a loan to pay the judgment The Umbrella ultimately protects your assets and business!
We specialize in helping businesses with their insurance protection, including their Umbrella risk. Contact us to discuss your Umbrella Liability thresholds.
