Commercial Umbrella Insurance (or Excess Liability coverage) helps protect your business from the risk of large lawsuits against your company. It’s a form of liability insurance that covers you when your general liability (GL), auto liability or other coverages aren’t sufficient to pay for damages. Although fairly rare, a large judgement againt your business can be devastating. Umbrella insurance offers a pretty affordable way to reduce that risk.
How this works is if there is a large judgement against your company, after your general liability is exhausted, your umbrella insurance would pay the remainder of the claim, up to the limit of your umbrella policy. For example: If your GL insurance has a limit of $1 million and you carry $10 million of umbrella insurance, in the event of a $3 millioin settlement, the GL insurance would pay $1 million and your umbrella insurance would pay $2 million. If you didn’t have umbrella insurance, that $2 million could come out of your pocket.
Umbrella insurance basically covers the same types of liability your GL, auto, Workers Comp and employer practices liability cover. It may also cover parts or all of your legal defense fees if you are sued.
Types of liability risks umbrella insurance covers (just to name a few):
- Customer slips and falls
- Your company’s delivery truck runs a red light and causes a crash
- Your product has a manufacturing defect and injures customers
- Your business operations causes a fire that spreads to another business, destroying inventory and property
Again, the cost is relatively inexpensive. Most small business owners can expect to pay between $500 and $1,500 per year for commercial umbrella coverage. However, depending on the size of the business and industry, commercial umbrella can exceed $2,000 per year for $1 million per occurrence coverage limit, with a $2 million aggregate.
If you don’t currently have commercial umbrella coverage, it is well worth your time to at least get a quote from your agent. It could be life-saver for you and your business in case of an expensive accident.
Be aware, be safe!