How Much Commercial Umbrella Insurance Is Enough?
This is really a question for your insurance agent. Your agent, who knows the ins and outs of your business and the potential liabilities it may face, is far more prepared to suggest how much Commercial Umbrella Insurance you may want to carry.
That said, there are a few considerations that can help give you an idea about how much Commercial Umbrella Insurance may be appropriate for your needs.
Commercial Umbrella Insurance Comes in $1 Million Increments
Usually, Umbrella coverage comes in increments of $1 million, so you’ll probably have to buy a policy with at least a $1 million limit.
That might sound like a lot, but remember that many General Liability Insurance policies have a per-claim limit of $1 million already. If you’re concerned that your coverage isn’t adequate, purchasing another $1 million in coverage is a reasonable step to take.
Keep in mind that you may not be able to purchase a Commercial Umbrella policy unless your underlying policy already has a certain limit. So if your General Liability policy is on the lower end of the spectrum (a $300,000 limit, for example), you may need to raise the actual General Liability limit before considering a Commercial Umbrella policy.
More Liability Exposures = More Possible Claims
It makes sense to have coverage that aligns with your risk exposure. Businesses that are especially vulnerable to certain liabilities may require more coverage than those with very limited liability.
A simple example is a storefront versus a home-based business. A business owner with a public storefront has more potential liability because people can visit the property throughout the day. That opens up the risk of someone getting hurt on the premises every time someone walks through the door. A person who sells things online and ships them from home may not have to worry as much about that risk.
When it comes to Commercial Umbrella Insurance, you want to take stock of the potential liabilities you face and see if the extra coverage is worth it. So if, for example, you have a wealthy client (whether that’s an individual or a business entity), it might make sense to add Commercial Umbrella coverage because that person could stand to lose more and sue for more in the event of a General Liability claim.
Here are some other potential sources of risk exposure that Commercial Umbrella Insurance might address:
- Your business is open to the public and experiences lots of foot traffic, which increases the chance of facing a General Liability lawsuit.
- Employees use their personal vehicles to run work errands or perform work, which opens up the potential for Hired and Non-Owned Auto Liability Insurance claims.
- The nature of your business makes employee injury more likely, so you may face Employer’s Liability Insurance lawsuits.
Again, your agent can help you assess your exposures and make an informed decision about your coverage needs.
Commercial Umbrella Coverage Is Cost-Effective
Finally, there’s the issue of cost. You obviously don’t want to waste money on coverage that you don’t need, but if you’re looking to increase coverage, purchasing a Commercial Umbrella policy is often more cost effective than increasing individual policy limits.
For a few hundred dollars a year, an Umbrella policy can provide an additional $1 million of coverage that can be applied to a number of underlying policies. Usually, this ends up being a lot less expensive than raising the limits of each policy.
To get a better idea of what your business might pay for a Commercial Umbrella policy, take a look at "How Much Does Business Umbrella Insurance Cost?" But to reiterate (one last time,) your insurance agent will be able to give you a more exact answer.