Who Needs Commercial Umbrella Insurance?
Commercial Umbrella Insurance isn’t a requirement for licenses or permits in most cases, so almost no business technically needs this policy. But plenty of clients may require you to have high coverage limits, and, depending on your business, an accident could exceed your insurance policy limits. Having Commercial Umbrella Insurance in these situations could be invaluable.
Think of it this way: when you get caught in a rain shower, you don’t necessarily need an umbrella to survive. But you might wish you had remembered to bring one.
A better question to ask might be, “Which businesses benefit most from having Commercial Umbrella Insurance?” To find out where your business falls on that spectrum, ask yourself…
- Does my business serve high net-worth clients?
- Do I have a client that requires higher liability limits than others?
- Does my business have significant auto liability, employer’s liability, or general liability exposures?
- Do any contracts require that I have Commercial Umbrella Insurance?
- Do I want to avoid dipping into my personal savings in the event of a catastrophic lawsuit?
If the answer to any of these questions is “yes,” you can probably benefit from having Commercial Umbrella Insurance. Let's learn more about these exposures and how Commercial Umbrella coverage can help.
Commercial Umbrella Benefits for Businesses with High Net-Worth Clients
Why might you want Commercial Umbrella Insurance if you serve high net-worth clients? Because those clients stand to lose a lot from any accident or mistake on your part, and the cost of damages might be more than what the standard liability policy can handle.
For a simple example, say you’re working on a project for a wealthy businesswoman. She comes to your office one day to check on your work, but as she’s walking, she trips over a loose strip of carpet, falls, and throws out her back. Because she’s unable to work for a couple of weeks, she loses income, and she sues you to compensate for those losses.
The problem? Her lost income is hundreds of thousands of dollars, and you’re responsible for coming up with that money.
Your General Liability Insurance policy may address that type of claim, but then what? With added attorney fees and court costs, your limits could easily be reached. Commercial Umbrella Insurance can supplement your GL coverage in case you face any more claims that year.
Commercial Umbrella Benefits for Businesses with Clients Who Demand High Liability Limits
If you have clients who demand you carry higher liability limits than what your standard policy provides, purchasing Commercial Umbrella Insurance may be worth it to keep the accounts. Commercial Umbrella Insurance is usually a very cost effective way to bolster your coverage, so even if you only have a single client demanding higher limits, you won't have to spend a fortune on insurance just to get the contract.
Check out "How Much Does Business Umbrella Insurance Cost?" to get a better idea of what you might pay for this policy.
Commercial Umbrella for Businesses with Auto Liability, Employer’s Liability, and General Liability Exposures
It’s important to note that Commercial Umbrella Insurance can't supplement all of your insurance policies. In fact, it’s only useful when you have underlying Hired and Non-Owned Auto Liability, Employer’s Liability, and General Liability Insurance policies.
If your business is especially prone to these types of claims, you may want Umbrella coverage. For example, do your employees frequently use their own cars to run business errands or go to meetings? If so, you may want to have supplemental coverage on hand in case they ever get into an accident.
Businesses with Contracts that Require Commercial Umbrella Insurance
Sometimes a contract may require your business to have certain types of coverage in place. Sometimes it may even specify Commercial Umbrella Insurance coverage. If that's the case, you may want Umbrella Insurance to fulfill the contract.
Commercial Umbrella Benefits for Businesses that Prefer Not to Dip into Assets to Cover Liability Expenses
Perhaps you just want to err on the side of caution and carry extra coverage in case any huge claim pops up. After all, a devastating judgment or settlement can bankrupt your business if you don’t have adequate funds. Commercial Umbrella Insurance may prevent you from using personal or business assets to cover an expensive claim.
Can Your Business Benefit from Commercial Umbrella Insurance?
The considerations above can help you decide whether this policy makes sense for your business. However, ask your insurance agent about it before you make a decision. Your agent can help you determine the costs and benefits of the policy.
For more reading, check out "Umbrella Insurance: A Policy for When it’s Raining Lawsuits."