Umbrella Insurance is one of the most important types of insurance your company can buy. It protects your business from holes or limits in existing policy coverage as well as from financially draining lawsuits. Just as you carry an umbrella to protect you from a potential downpour, this coverage protects your company from the types of claims that could close your business.
Businesses choose umbrella insurance to back up the limits contained in their underlying liability policies (commercial general liability, business auto, employment practices liability, workers’ compensation and professional liability.) For the most part, it is used to cover exceptionally large events or losses with low probabilities of occurrence. Without an umbrella policy, these events – as few and far between as they may be – would be financially devastating to many companies.
Who should consider an umbrella policy?
All types of companies would benefit largely from this coverage. Because it extends coverage so dramatically at a relatively small additional cost, many choose to pay the extra price. The amount of coverage needed will always depend on the total value of your assets.
How does an umbrella policy work?
Assume a jury ordered your business to pay $3 million in damages for a liability claim, but your general liability policy has a $2 million limit. Your company would normally be required to cover the additional $1 million. However, with a $4 million Umbrella policy, the $2 million commercial policy would exhaust, and then the Umbrella policy would cover the outstanding $1 million.