Entrepreneurs who want to know how to get commercial umbrella insurance typically request contract requirements demanding coverage exceeding standard policy limits from an insurer. Typically, this type of insurance adds additional liability coverage for high-value lawsuits. For instance, when a lawsuit covered by your general liability insurance reaches its limit, commercial umbrella coverage helps to cover the remaining costs.
Moreover, commercial umbrella insurance can increase coverage for multiple policies by $1 million. However, before securing umbrella insurance, insurers typically ask for a specific amount of coverage for the underlying policy as a requirement.
What is Commercial Umbrella Insurance?
Commercial umbrella insurance is a type of insurance that provides additional liability protection as a benefit for businesses. Standard commercial insurance doesn’t just plan for sudden events but also offers additional protection if your liability insurance is not enough.
However, this is where commercial umbrella insurance takes over. For instance, your business is to cover extra costs when an employee causes a car crash while making deliveries.
Therefore, this leads to many injuries and exceeds the liability limits of your commercial car insurance. In such cases, commercial umbrella insurance steps in to cover a significant amount.
How to Get Commercial Umbrella Insurance
For those considering commercial umbrella insurance, here is a step-by-step guide on how to get commercial umbrella insurance:
Evaluate business requirements
Assess your business requirements to determine the necessary coverage. Consider the risks associated with your business operations to make an informed decision about the extent of coverage required.
Choose a Respectable Policy
Identify an insurance company specializing in commercial umbrella insurance. Seek recommendations from fellow business owners or research to find a reputable provider.
Request a Quote
Contact the chosen insurance company and request a quote. Ensure that the information you provide about your business is accurate to receive an estimate that aligns with your specific needs.
Evaluate and compare the quotes received from various insurance companies. Look for a balance between comprehensive coverage and affordability, ensuring that you choose the best-suited option.
Once you’ve identified the right policy, proceed to purchase it. Take the time to thoroughly understand the terms and conditions outlined in the policy to ensure clarity and avoid any misunderstandings in the future.
How Does it Work?
Let’s think of a situation where your company was fined $2 million by a lawsuit, but your business liability has a limit of $1.5 million. In such a situation, your liability insurance covers the expenses of legal defense, settlements, and judgments within the policy limit.
This leaves you responsible for the outstanding debt of $500,000. If you do not have a commercial umbrella policy, paying the $500,000 from your business income could put you at risk.
This policy serves as the best insurance liability as it helps pay costs that exceed the primary policy’s limit.
Who Needs It?
Numerous factors affect the expenses of this insurance, which include business size, industry risk, and the number of policies to be covered.
However, the coverage amount could also affect the expenses, with this coverage typically offering coverage in $1 million increments. Notably, a $1 million increase in coverage tends to cost less than a $4 million increase.
It’s important to recognize that opting for a commercial umbrella policy can be a cost-effective alternative compared to raising the limits on other existing policies.
What Does Commercial Umbrella Insurance Cover?
These policies share similar options and coverage as the underlying business insurance policy. Furthermore, adding it offers coverage in specific areas, including:
When considering adding extra coverage to general liability insurance, it helps pay off legal expenses if someone sustains injuries in your business zone.
Third-party property damage
When combined with a general liability policy, commercial umbrella insurance contributes to covering legal costs associated with destruction or damage to third-party property.
Car accident liability
Adding this insurance to commercial auto insurance or hired and non-owned auto insurance helps cover the costs of legal action arising from damages caused by your vehicle.
Employee injury lawsuits
The merger of this insurance with the employer’s liability insurance assists in covering legal expenses related to employee lawsuits concerning work-related injuries.
What Doesn’t Commercial Umbrella Insurance Cover?
This policy does not extend coverage to all types of insurance claims. For instance, a policy like commercial property insurance cannot be included within a commercial umbrella insurance policy.
If a situation like an office fire causes damage to business tools, the expenses would be covered by your commercial property insurance. Furthermore, it wouldn’t assist, as it does not extend its coverage to incidents like property damage.
How Much Does It Cost?
A typical cost for this coverage is around $40 per month for each extra $1 million of coverage. The total expense for a commercial umbrella policy and the business’s risk profile is influenced by the coverage amount.
Furthermore, small enterprises offer less coverage of $500 annually, while 36% fall within the $500 to $1,000 annual payment range.
Also, covering the whole premium upfront is a viable strategy. Meanwhile, monthly payments offer convenience; choosing to pay the full amount in one go can result in a lower overall annual cost.
If the financial means are available, paying the commercial umbrella policy premium in a significant sum can be a cost-effective choice.
How much commercial umbrella insurance do I need?
The coverage is determined by the nature of the risks in your industry. Insurance companies structure policies with a limit from $1 million to $15 million, offered in increments of $1 million.
However, various businesses, such as a high-end jewelry store or a company with a fleet of delivery trucks, have various risk profiles. Hence, the coverage needs of a retail store may differ from those of a business involved in construction.
To determine the right coverage for your specific business, consulting with your insurance agent is advisable. Their ideas can help you get coverage of the unique risks associated with your industry.
After reaching the maximum limit of a policy, commercial umbrella insurance offers extra coverage for claims. These claims are related to general liability, commercial auto, or employer’s liability insurance.