Commercial umbrella insurance provides extra coverage in cases wherein liability claims exceed the other liability coverage limit. Businesses that don't have these insurance policies would have to cover the difference themselves. For example, if your policy has $2 million coverage limits, but you're being sued for $3 million, you would pay out of pocket for the extra $1 million.
Having these small business liability protection policies can help business owners maximize their coverage limits and avoid shelling out for anything during crises, thus reducing the risk of going bankrupt. Just make sure that you fully understand your insurance coverage limits. Otherwise, you might end up compromising the actualization of your business continuity plan.
A commercial umbrella policy generally has the same coverage as business liability insurance, including legal judgment and settlement charges, attorney fees, lawsuit penalties, medical expenses, and third-party property damage.
Whether you should invest in commercial umbrella insurance or not heavily depends on several factors.
First, calculate the information you carry. If your business stores extremely sensitive Personal Identifiable Information (PII), you might want to get liability coverage to support your cyber insurance plan.
Statistics show that businesses lose an average of $150 per compromised data. Therefore, an insufficiently insured institution that compromises 1,000 individual pieces of information and confidential records may end up losing upward of $150,000. This amount could easily cause anyone to go bankrupt.
Second, honestly assess the risk of your business getting sued. Having sufficient commercial umbrella insurance coverage to cover lawsuit penalties—which usually exceed general liability limits—would drastically help your business continue operations.
Note: An umbrella policy only covers lawsuits and claims that will not result in legal action.
How much does commercial umbrella insurance cost, and should you invest in a policy? Unfortunately, cookie-cutter business risk protection plans do not exist. So instead, you have to assess your insurance needs, compare them with your current liability insurance coverage, then scan for inconsistencies and gaps.
Navigating through the different commercial umbrella insurance companies on the market can feel intimidating, especially for first-timers who know little about liability insurance.
To make things easier, we have sorted out the top insurers in the country. These institutions offer varying liability coverage terms and conditions, so make sure you go with one that can address your specific business insurance needs, demands, and preferences.
GEICO offers the most extensive, advantageous umbrella coverage terms on rental properties. It generally covers several personal injury claims, including cases wherein your tenant accidentally harms someone (e.g., tenant's dog bites a passerby).
This type of commercial umbrella coverage would prove useful in modern times where people heavily rely on vacation rental properties. In fact, records show that there are already more than 600,000 Airbnb listings in the country alone.
Traveler has extensive endorsements and coverage limits that would prove helpful to various professional service providers. Apart from the standard defense coverage, their policy also covers newly acquired organizations or startups and professional employees or officers. You can also drive the policy limit up from the minimum industry standard of $1 million to a sizeable $10 million.
The problem with a standard commercial umbrella policy is their extended general liability insurance protection often spans around $1 to $2 million. Unfortunately, this amount would not suffice for a medium to large-scale company. In fact, lawsuits filed against larger entities could easily hit the eight-digit range, which would be more than what the average commercial umbrella insurer offers.
For medium to large companies that want a quality, high-coverage commercial umbrella policy, turn straight to Chubb. They are a reputable insurer that provides around $25 to $50 million extra coverage, depending on your current liability insurance and industry type. Clients from the energy and construction industries can also reach out to them for special covered claims and higher-than-average limits.
Assured Standard strives to help small to medium-sized businesses utilize insurance protection for business continuity during crises. Check out our full guide explaining commercial insurance.
Commercial umbrella insurance costs about $40 per month to cover an additional $1 million.
With a solid, comprehensive umbrella policy in place you can protect your assets from any physical harm. Umbrella policies do not cover property damage to personal items like homes or cars, but they will provide coverage for bodily injury and medical expenses.
Know the difference between liability and lawsuits. A lawsuit is when you are legally obligated to defend yourself in court against a plaintiff or prosecutor, meaning that they have filed charges with your local authorities on behalf of their client (the injured party).
Umbrella insurance can cover lawsuits but only if it does not result in legal action; otherwise, these types of claims will fall under the limits of your primary liability policy.
In this day and age, it's important to have the right amount of liability coverage. If your assets total $500,000 but you owe more than that in debt, experts recommend a coverage equal to the value of your assets without regard for those debts.
Insurance premiums paid by a business for any type of insurance can be deducted as an expense. A personal liability umbrella is not one of those types, so the premium would not qualify for deduction from taxation.
We highly encourage eligible companies to invest in a commercial umbrella insurance policy if they do not already have one yet. The extra liability protection can spell the difference between feasible business continuity and bankruptcy. Plus, it does not even cost nearly as much as increasing the coverage on standard liability insurance policies, so you won't have to worry about the premiums.
Also, keep in mind that commercial umbrella insurance can help you only if you have the necessary liability policies in place as well. Remember, these will simply increase your existing insurance policy limits. You can only maximize the advantages and protection that commercial umbrella insurance offers if your general liability policy coverage does not stray from the claim you need to make.
Assured Standard explains that companies with less than a hundred employees can get an all-in-one property and general liability insurance package through business owner's policies. Check out our full guide to getting insurance coverage for your small business.
