Umbrella Insurance: This liability insurance can serve as an extra layer of financial protection if your business exceeds its other forms of coverage.
Most insurance policies work the same way: you experience a financial loss, you file a claim, and if the claim is covered by your policy, you receive compensation.
Umbrella liability insurance doesn’t really deviate from this model. But because it isn’t a “primary” policy, its coverage can only be applied in certain situations. Knowing when you can use your commercial umbrella policy is the part that’s sometimes challenging.
Once you know the terms of umbrella insurance, you’ll have a better idea of when you can draw on this policy. Let’s take a look at how it works.
How Umbrella Insurance Supplements Coverage
Think of umbrella insurance as a backup for liability policies that you already have. When a claim exceeds your primary policy’s limit, you can apply your coverage to the amount still owed on the claim.
Usually, umbrella coverage can be applied to claims made on these liability insurance policies:
- General liability insurance
- Commercial auto / hired and non-owned auto insurance
- Employment practices liability insurance
This is what sets umbrella insurance apart from most policies: It’s only useful when your liability policies have reached their limits. It’s like a reserve policy, that fills in any gaps if a claim exceeds your other policy limits.
An Umbrella Insurance Example
Let’s consider a scenario in which you might benefit from having umbrella insurance. Say you run a high-end retail shop where clients come in frequently to look at your merchandise.
During a storm, a pool of water accumulates on the tile in front of the door and before an employee can mop it up and lay down mats and a wet floor sign, a woman slips and falls onto the tile.
You call an ambulance, and she goes to the hospital. A few days later, you receive a notice that the woman is suing your business.
The injuries she received in the fall have left her with high medical bills and unable to work. You, your attorney, and her attorney agree to a settlement to avoid going to court. But the settlement is $1.4 million, and your general liability insurance has a limit of up to $1 million per claim.
Without an umbrella policy, you would have to pay the $400,000 out of pocket or from your business assets. But if you have umbrella insurance, you can file a claim for the additional $400,000, plus your legal expenses, without having to tap in your business’s assets.
Is Umbrella Insurance Right for You?
As part of our complimentary insurance audit, we identify whether umbrella insurance could reduce a potentially sizable out-of-pocket liability for you given limitations on your current insurance policies. Our audit also identifies over/under-coverage issues. We then contact a multitude of insurance carriers to find you the best deal so you don’t have to.