Commercial umbrella insurance is an insurance policy that provides additional liability coverage beyond the limits of your other business insurance policies, such as your General Liability or Business Owners Policy. It can help protect your business from major financial losses that can come from lawsuits or other claims.
The purpose of commercial umbrella insurance is to provide you with added protection in the event that a lawsuit or other claim exceeds the limits of your other business insurance policies.
This type of policy can help protect your business assets and income from being used to pay for damages or legal fees.
What Can it Cover?
Commercial Umbrella Insurance can provide coverage for things like bodily injury, property damage, personal injury, and more. It can also help cover the costs of legal defense if you are sued.
The coverage limits on a commercial umbrella policy are typically much higher than the coverage limits on other business insurance policies.
This can give you peace of mind by knowing that your business has the extra protection it needs in the event of a lawsuit or other claim.
What is its purpose?
Umbrella policies have three functions:
- Provide additional limits above the occurrence limit of the insured’s primary policies
- Take the place of primary insurance when primary aggregate limits are reduced or exhausted
- Provide broader coverage for some claims that wouldn’t be covered by the insured’s primary insurance policies, which would be subject to the policy retention.
Most umbrella liability policies contain one comprehensive insuring agreement.
The agreement usually states it will pay the ultimate net loss, which is the total amount in excess of the primary limit for which the insured becomes legally obligated to pay for damages of bodily injury, property damage, personal injury, and advertising injury.
What Does it Not Cover?
Commercial Umbrella Insurance does not cover everything.
It is important to read your policy carefully to understand what is and is not covered. Some things that are typically not covered by umbrella policies include professional liability, workers’ compensation, and automobile insurance. These are not typically covered because they have their own separate insurance policies.
You can purchase an umbrella policy that includes coverage for these things, but it may come with an additional cost.
How Does Umbrella Insurance Pay Out?
Read the insuring agreement carefully. Some umbrella policies promise to make direct payments on behalf of the insured for those sums of money the insured becomes legally obligated to pay because of liability imposed upon the insured by law or assumed under contract.
This is “Pay on Behalf.” Most umbrella policies are Indemnity Policies, and the language says the insurer will indemnify or reimburse the insured for money the insured is legally obligated to pay as a result of liability that is imposed upon the insured either by law or assumed under contract.
Are there Policy Limits?
Yes, commercial umbrella policies have limits. The limit is the maximum amount of money that the insurance company will pay out for a covered claim.
The limit is typically stated as a dollar amount on the policy. Most policies have a limit of $1 million, but some may go as high as $5 million. It is important to choose a policy limit that you feel comfortable with, and that will meet the needs of your business.
Keep in mind that policies with higher limits will typically have a higher premium.
When choosing a commercial umbrella policy, it is important to work with an experienced insurance agent to make sure you are getting the coverage you need.
They can help you understand the coverage options and choose a commercial policy with the right limits for your business. Contact your local Kenneth Rhodes & Associates Agent for help finding the right policy.