It’s estimated that around 25% of businesses won’t reopen after disaster strikes. For business owners, this is scary.
After all, when you put your time, money, and effort into building a business, the last thing you want is to close your doors because of a disaster.
One of the best ways to protect your business is with the right commercial insurance provider. However, a simple business policy may not be enough. This is where an umbrella policy comes in.
Keep ready to learn about umbrella insurance for small business owners and its benefits.
What Is an Umbrella Policy?
Commercial umbrella insurance provides more coverage after your commercial policy’s limit is reached. This coverage can compensate for liability claims, general liability, employer’s liability insurance, and commercial auto claims.
If you purchase commercial umbrella insurance, you likely need to fulfill a contract that requires higher than usual policy limits.
You have more liability coverage to handle more expensive lawsuits with commercial insurance. This can help you protect your business and avoid having to close your doors for good.
What Businesses Need an Umbrella Policy?
Almost any business could benefit from having an umbrella policy. However, some businesses are at more risk than others.
Some situations that usually require this additional coverage include if your business is open to the public or if you have employees who work on someone else’s property.
You may also have a contractual obligation to carry this additional coverage. This is most common if you have government contracts.
What Does an Umbrella Policy Cover?
Standard business umbrella insurance provides coverage for things other insurance policies don’t cover. Some of the things this policy may cover include:
Claims That Surpass Other Policy Limits
If a filed claim surpasses your other business insurance limits, your umbrella policy will kick in.
For example, if you have a business auto insurance policy with coverage of $500K for bodily injury, but you are sued for $1 million, the umbrella policy can cover the $500K difference.
Claims That Surpass the Aggregate Limit of Other Policies
Sometimes, you don’t exceed policy limits with one claim. However, several smaller claims can max out your policies.
If you have umbrella coverage, it may cover any maxed-out policies.
Claims That Aren’t Covered by Your Other Commercial Insurance Policies
An example of this is business general liability insurance, which will only cover your own equipment. If you rent equipment and it is damaged, your business is liable for the damages.
If you have umbrella coverage, it may take care of these costs.
What Doesn’t a Business Umbrella Policy Cover?
No insurance offers unlimited protection. Business umbrella insurance is no exception to this. Some of the things that aren’t covered by umbrella policies may include:
Claims Beyond the Umbrella Policy Limit
Even an umbrella policy has limits. If the claims against your business exceed the limit of your umbrella policy, you must cover the bill for the difference.
If you operate a high-risk business, it’s a good idea to have a cash reserve for these situations.
Not Having the Right Standard Business Policies in Place
Businesses that have not purchased general liability insurance cannot expect an umbrella policy to provide coverage.
Umbrella insurance is designed to provide extra coverage, not general coverage.
Property Insurance Claims
If damage occurs to your business property, you must use property insurance to replace or repair issues. Umbrella insurance will not cover damage to any property your business owns.
Lawsuits or fines caused by you or someone else in your business breaking the law (in any way) won’t be covered. In this case, you must cover the costs yourself.
Errors and Omissions
Your umbrella insurance will not cover losses that occur from mistakes caused by errors and omissions.
If you have E&O insurance, you should also have cash on hand to cover extensive claims.
Commercial Umbrella Insurance vs. Excess Liability
You may see the terms excess liability insurance and commercial umbrella insurance used interchangeably. However, it’s worth noting that these are not the same.
Purchasing excess liability insurance offers more coverage for just one business policy – general liability insurance.
With commercial umbrella insurance, you receive coverage for several liability policies if a claim is made against your business that exceeds the set limits.
The Top Takeaways About Umbrella Insurance
As you begin looking at umbrella insurance options, it’s important to remember the basics of this type of policy.
For example, you can’t purchase umbrella insurance if you don’t have a minimum of one other business insurance policy. This includes commercial auto insurance, employer’s liability, or general liability.
Also, umbrella insurance will not work with commercial property or professional liability insurance. While it can boost other policies, it can’t be used for these types of claims.
You can purchase umbrella insurance in $1 million increments.
Your Business Can Benefit from an Umbrella Policy
Knowing more about an umbrella policy will help ensure you get the coverage your business needs to recover if disaster strikes. As a business owner, you can’t afford to take risks with your livelihood. An umbrella policy will help ensure you are fully covered.
If you have questions or want to learn more about umbrella policy options for your business, contact Kicker Insures Me Agency. We will be happy to answer any questions and help you get the coverage needed to protect your business.