| NYC Business Group
How Does Commercial Umbrella Insurance Work?
Commercial umbrella insurance provides extra coverage if you exceed certain liability limits. Without commercial umbrella insurance coverage, one would have to pay out of pocket for liability claims that exceed your coverage limits. Most business owners buy commercial umbrella insurance to fulfill their client requirements for liability limits over $2 million. However, if you work in an industry with frequent lawsuits or infrequent but expensive lawsuits, commercial umbrella insurance is a good investment. Although commercial umbrella insurance does not cover primary liability, it helps cover the extra cost that includes:
- Medical bills
- Legal costs
- Damage to other people's property
- Judgment and settlement
How Does Commercial Umbrella Insurance Differ from other Insurance Policies?
In essence, commercial umbrella insurance works like other insurance policies, although they have a few differences. After experiencing a financial loss, you file a claim with your insurance company, and the company compensates you up to your policy limit. However, qualifying loss is one of the huge differences. For commercial umbrella insurance to kick in, you must have exceeded the limits of other insurance policies. Secondly, commercial umbrella insurance only covers liability claims and never property damage. Knowing these differences can help you understand how umbrella insurance work, how to get the most out of it, and how to avoid mistakes. For example, umbrella insurance can provide extra coverage at an affordable rate instead of raising your maximum coverage for each insurance policy.
Most business owners have umbrella insurance because they understand its importance. It may seem like you may never exceed your coverage, but the unexpected can occur. For example, if a customer slips and falls in your store and sustains serious head injuries. The customer can sue your company/business for their lost income, medical expenses, and associated expenses from the accident. What looked like a small accident now becomes serious, and you could be facing serious consequences. If you, your attorney, and the customer's attorney agree to settle for $3 million, and your general liability insurance policy has a limit of $2 million, you are in trouble! The insurance cannot cover the full amount, and you may have to pay the $1 million from your own pocket/savings! This might have serious financial implications because you can even close the business or run bankrupt. However, if you had umbrella insurance, the policy would cover the excess, thus preventing you from paying the $1 million-plus legal fees from your own pocket! That would be a lifesaver! Call our Agency today to get a FREE Quote!
In a second example, if your employee is involved in a car accident while making a delivery, your insurance company will be involved. The umbrella insurance would take over if the property damage and injuries sustained exceed the commercial auto liability limits. However, if you do not have one, you would have to pay the amount that exceeds your policy limit using your own money. This may put your business at risk. That's why it is prudent to have an umbrella insurance policy. Although umbrella insurance is automatically triggered, it is essential to ask your insurance agent how your umbrella coverage is triggered just in case you need to use it in the future.
How Umbrella Insurance Supplements Coverage
Although primary insurance policies are essential in protecting you against lawsuits and financial losses, consider purchasing umbrella insurance. If your business fall in any of the following category, avoid taking chances and invest in umbrella insurance:
- Photo & Video
- Non-profits
- Personal care
- Technology/IT
- Food & beverage
- Consulting
- Healthcare professionals
- Manufacturing
- Insurance professionals
- Cleaning services
- Retail
- Wholesale distributors
Should LLCs and Sole Proprietors buy Commercial Umbrella Insurance?
In a short answer, YES. Although you may assume that your business is small, the unthinkable happens, and you have to pay huge amounts of money for an accident on your business premises. Remember, if your business is not big enough to handle an expensive lawsuit, it might not survive. Also, if you want to attract and work with big clients, having enough liability insurance is vital to meet their requirements. Therefore, sole proprietors and LLCs should consider buying commercial umbrella insurance. Let us help you with making a decision on your commercial insurance
With umbrella insurance, you can supplement several policies concurrently. Common policies you can supplement simultaneously include:
- Commercial auto insurance
- General liability insurance
- Hired and non-owned (HNOA) liability insurance
- Employer's liability
To increase your liability limits on each policy, you need to pay a premium, and you will be fine. However, excess liability insurance is a policy that boosts coverage on only one insurance policy. If you want excess liability insurance, you can only choose to boost either errors and omissions (E&O) or general liability insurance. The umbrella insurance can cover claims under your supplemented insurance policies. Some of these liabilities include:
- Advertising injuries, e.g., libel and slander
- 3rd party bodily injuries
- 3rd party property damage
- Employee work injury lawsuits
- Vehicle accident lawsuits
Keep in mind that umbrella insurance only supplements insurance policies you already have. Therefore, if you do not have an employer's liability insurance and face a lawsuit that would be covered under that policy, umbrella insurance cannot cover the costs incurred.
Should I Purchase Commercial Umbrella Insurance?
You increase your liability risk when you and your business interact more with your customers and clients. If your employees use heavy machinery/equipment to do their tasks, you are at a higher risk. Umbrella insurance coverage can help if:
- Your business allows the public to visit during open hours
- You or your employees frequently interact with customers
- You or your employees work on some else's property
If you put all these scenarios in perspective, you will understand the need to have umbrella insurance. However, do you know how much an umbrella insurance policy cost? The cost of umbrella insurance varies depending on:
- Size of your business
- Amount of underlying coverage
- Type of business
For example, some industries encounter more risks than others, thus increasing their insurance costs. Since umbrella insurance is sold in a $1million increment, they are fairly affordable considering the vast benefits to business owners. Take your time to research online, get professional advice before buying commercial umbrella insurance. We are just the Professionals who will help you in making an educated decision.