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    General Liability Insurance vs Umbrella Policy Coverage

    General Liability Insurance vs Umbrella Policy Coverage

    What's the difference between a general liability policy and an umbrella policy? General liability insurance policies play a crucial role in business continuity. You can rely on these policies for financial support in dealing with bodily, personal, and property damage claims against your business. Businesses need to increase their liability coverage every time they expand.

    Unfortunately, not every SMB can afford an extensive commercial general liability policy. State-mandated business insurance coverages are already costly. If you need added liability coverage but have limited funds, try umbrella liability insurance instead. An umbrella policy pays extra coverage in cases wherein liability claims against your business exceed your standard liability limit.

    What Is the Difference Between Umbrella Insurance and General Liability Insurance?

    Commercial general liability insurance covers several business risks. You can rely on these to cover property damages, third-party bodily injury claims, and even personal injury offenses. These policies provide benefits imperative to the success of your business—but they can also come with a steep premium and not enough coverages.

    Fortunately, you can upgrade your liability insurance policy at minimal cost using umbrella insurance. An umbrella policy provides coverage in cases wherein the active insurance policy is lacking.

    For instance, let's say a client sues your business for bodily injury amounting to $2,000,000, but your commercial general liability insurance policy caps at $1,000,000. In cases of underinsurance, the policy owner pays the difference out of pocket.

    Now, let's say you have umbrella liability coverage. Since umbrella policies serve as extra liability insurance cover limits, your policy would shoulder the $1,000,000 gap.

    Does Umbrella Insurance Cover General Liability?

    When you combine general liability and umbrella insurance coverages, you can extend the latter's limitations. An umbrella policy covers claims exceeding your liability limit. So, if you qualify for umbrella insurance, the new policy would cover the same crises, accidents, and claims that your current plan does.

    How Big of an Umbrella Policy Do You Need?

    General liability and umbrella insurance policies work together to protect your business. The latter cannot exist without the former. Instead of dropping a random coverage amount, we strongly recommend comparing your existing policy against the risk your business faces. If you identify any deficiencies in your commercial general liability insurance plan, boost them with an umbrella policy.

    While cookie-cutter plans do not exist, historical results show that most business owners use commercial umbrella liability to achieve limits exceeding $2,000,000. As we mentioned above, general liability is expensive. If you increase the limits instead of boosting them with efficient add-ons, you might end up wasting premiums.

    What Are the Limits of Umbrella Insurance?

    Remember that an umbrella policy only expands existing liability coverages. They could not pay for claims that your current plan does not cover, although your insurance company would likely reject your application if you had insufficient liability right from the get-go. Also, umbrella insurance coverage often ranges from $1,000,000 to $15,000,000 and is available in increments of one million.

    How Much Does Umbrella Insurance Cost?

    If you need a starting point for budgeting on your commercial general liability policy premiums, expect to shell out $40 monthly for one million dollars worth of umbrella coverage. On average, Forbes states that most businesses spend $500 to $1,000 on umbrella coverage per annum.

    However, remember that umbrella insurance premiums vary based on several factors, such as your company size, the maximum limit on your policy, and general business nature. Consult with a licensed insurance specialist for accurate quotes.

    How Do You Choose an Umbrella Coverage Policy?

    Budding SMBs might find the sheer number of insurance companies on the market intimidating. Where do you even start looking? To streamline the process, we recommend filtering your options based on several crucial criteria, including:

    1. Coverage Limits

    Your commercial umbrella policy limit should complement your other insurance policies. Assess your underlying policies, identify the deficiencies, then use your policy to cover the gap. Also, research the type of catastrophic loss that threatens your business the most.

    2. Insuring Agreement

    Look for an insurance company that pays on behalf of their clients rather than reimburses the losses. Ensure that your provider will cover claims right from the get-go. Otherwise, you might have to pay for the legal and medical payments involved out of pocket, then wait for a reimbursement.

    3. Coverage Trigger

    Your umbrella insurance policy should share the same coverage trigger as your current insurance plan. Commercial general liability coverage has two broad categories: occurrence and claims-made policies. A per-occurrence limit provides lifetime coverage for claims made on incidents during a policy's lifetime, while the latter only covers claims made during the policy's lifespan.

    For example, let's say you purchased an occurrence professional liability policy in 2015, then halted payments in 2020. A year later, a client sues you for an incident that occurred in 2017. Even if your occurrence policy is no longer active, your insurance company will still cover the incident.

    On the other hand, let's assume you had a claims-made insurance policy. In the example we mentioned above, your insurance would only cover the expenses if your policy is still active or has tail coverage.

    4. Self-Insured Retention Terms (SIR)

    Avoid umbrella insurance policies that have SIR terms. These terms indicate that the policy owner should shoulder a specific portion of the covered claims, thus furthering the threshold before an umbrella liability policy takes effect.

    In the technologically-dependent society we live in, cybercrimes have become quite rampant and is another thing business owners need to think of. Fortunately, Assured Standard can help. Check out our comprehensive guide on using cyber insurance to mitigate data breach loss.

    Frequently Asked Questions

    Is it worth having an umbrella policy?

    If you have significant assets, it's worth getting umbrella insurance. Your liability coverage might not be sufficient if you get sued for an incident that causes injury to someone else.

    How do you explain liability insurance?

    Liability insurance is your way to avoid the crippling financial impact of being found legally liable for injury or damage. Liability policies cover any legal costs and payouts, an insured party is responsible if they are found legally liable.

    Is umbrella insurance tax deductible?

    Umbrella insurance does not cover intentional or illegal acts. In general, there is the first layer of liability insurance policy for businesses. It covers accidents and unintentional acts or illegal act that may occur on the business premises, which can be very expensive to replace. For even greater protection though, umbrella policies are usually available at a lower cost because most claims fall under this level as well.

    What falls under general liability?

    General liability insurance policies will cover you and your company against claims of bodily injuries or property damage, including those caused by products, services or operations. It may also cover you if held liable for damages to a landlord's property.

    If you find yourself on the fence about whether to get umbrella liability insurance or not, we encourage reviewing your current policies. Go through the fine print to identify any deficiencies. Once you wholly understand how much coverage you have, reassess your company's insurability. Ideally, your liability limit should cover all the various claims and risks your business might face.

    Also, there is a misconception that businesses have to double their premiums to qualify for higher liability limits. On the contrary, you shouldn't even worry about the extra fees. Higher limits do not have to cost an arm and a leg. If you want higher coverage limits while minimizing the added premiums, open an umbrella insurance policy instead of boosting your standard liability policy.

    Assured Standard can give budding entrepreneurs a good starting point on how to utilize insurance coverages. Check out our resources on business insurance today!

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    Assured Standard will protect your business with the right insurance, depending on your needs. Now more than ever, it’s crucial to have the right general liability insurance experts on your side. Protecting the future of your business starts today.
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