All businesses pose liability risks to other parties. All liability risks could potentially devastate your business. However, the most-significant of these are the most likely to lead to trouble. So, standard liability insurance might not prove effective in the most serious cases. It is these cases that might merit the use of a commercial umbrella insurance policy? How can it help you?
Most businesses carry general liability insurance policies. They might carry other specialized coverage, too. So, if the business causes harm to a third party, liability insurance might be able to help the business compensate those affected. It might cover various costs the person might claim as well as the business’s legal fees in case of lawsuits.
Yet, nearly all liability policies will have policy limits and exclusions present. They will only pay a maximum dollar amount for claims; many will not cover certain claims at all. If you don’t have coverage, you might therefore have to pay a client’s liability claim out of your own pockets. That is bad news for any business.
It is umbrella insurance that might be able to help you out. This coverage acts like an umbrella, or extra protection, for the costs that a standard policy won’t cover. So, if someone files a claim above a policy's limits, this coverage might pay the difference. If your liability policy doesn’t cover a claim, umbrella coverage might.
Extra Covered Costs
Perhaps your general liability insurance contains a $500,000 policy limit. Yet, a customer who falls in your store could sue you for $750,000 in medical bills, lost income and other damages. Your liability insurance might pay only the first $500,000 of that claim. However, your umbrella coverage might be able to step in to cover some or all of the remaining $250,000.
The umbrella policy will have its own limits. However, these usually start with extremely high values. Please note, though, sometimes you must carry the highest available limits on your standard liability policies to qualify for umbrella coverage.
Additional Covered Liabilities
Sometimes, your standard liability policies will not cover certain types of damage. Umbrella policies might. Whether this is true will depend on the type of incident. Policies usually will not cover illegal or intentionally harmful acts committed against others.
Please note, you cannot simply apply all liability costs to your umbrella policy if you don’t have a policy to cover them. What we mean is, if you have a data breach in the business, you might need help from cyber liability insurance. You'll use it before turning to umbrella coverage. You might not be able to make an umbrella claim for the losses unless you have cyber liability coverage to start. Yet, umbrella coverage might apply if a claim exceeds the cyber liability limits.
If you ever have questions, contact Insurance Planning Service. We can help you determine the right course of action.
Also Read: Five Losses Covered by Commercial Umbrella Insurance