Some claims are just too big for normal insurance. As a business owner, you probably don’t want to think worst-case-scenario about a huge disaster or lawsuit befalling your business. It’s easier to shut those things out of our minds. But the truth is that it might happen. Big losses, though they might have a low probability of happening, do happen. And when they do they can be absolutely devastating.
That’s why there’s umbrella insurance. What does umbrella insurance do, exactly? And why do you need it for your business? We’ll explain what umbrella insurance can do for your business and why you might want to consider it.
What’s umbrella insurance?
It’s easiest to define umbrella insurance by explaining what it will do for your business. There are two main areas in which umbrella insurance can add protection.
1. Umbrella provides extra liability coverage.
Umbrella insurance is basically extra coverage that sits on top of your existing policy. Just like – you guessed it – an umbrella, it provides protection against a storm. Umbrella insurance protects your business from holes or limits in your existing coverage that could leave you open to a big loss. It will also protect your business from financially ruinous lawsuits arising from liability. It’s always important to lower your liability risks, but some things are out of our control.
Essentially, umbrella insurance backs up the limits you have in your current liability policy. Most of the time it’s used for super-catastrophes that exceed the limits on the underlying policy.
What if your business had a huge liability claim? We’re talking $5 million. Yikes. You have general liability, but the limit on that policy is $2 mill. So…where’s the remaining $3 million going to come from? If your business has umbrella insurance, not your cash register. Let’s say that your business has a $4 million umbrella policy. Once your GL pays out $2 million, your umbrella could pay out the remaining $3 million. Phew.
2. Umbrella can help you out in areas where you’re not covered.
Umbrella insurance can also provide protection for claims by broadening coverage, meaning it can provide coverage in areas that wouldn’t be covered with your underlying policy. However, you have to keep in mind that a Self-Insured Retention will probably apply. A SIR is pretty similar to a deductible, meaning that you’re responsible for paying part of the claim. SIRs vary by state and your particular situation.
How much coverage does my business need?
The amount of umbrella coverage you need depends on your business’s assets and what’s at stake in the case of a big claim. Pretty much any business can benefit from an umbrella policy because it adds a lot of extra coverage for usually a relatively low additional cost to your premium. We know that it’s always nice to save money on business insurance.
Society has become more and more prone to big lawsuits that can result in huge financial judgments. You never know when a liability claim could arise or what people could blame your business for. Even if your business has done nothing wrong, the costs of a lawsuit can be astronomical.
So, as a business owner, umbrella insurance is a way of protecting what you worked hard to build. Yes, you might see the chances of a huge, ruinous claim as being slim, but slim doesn’t mean impossible. Claims happen. Lawsuits happen. Liability happens. But umbrella is there to provide you with some peace of mind. Your business doesn’t have to get sunk because of one huge claim.
If you want to find out more about umbrella insurance or get a free quote for your business insurance, we’d love to help! We know that you worked hard to build your business, so we want to help you make sure that it’s completely covered and protected from anything that life could throw at you. We’ll help you find the coverage that’s right for you, and we’ll help you save money on your insurance while we’re at it.