Does your business need flexible coverage? An Umbrella Insurance policy might be right for you.
In this Ultimate Guide, we'll define what it is, what it covers, who needs it, and we make recommendations on where to find the best policies to assist you in making an informed decision.
What is Umbrella Insurance?
Sometimes, it's difficult to know just how much coverage you'll need, or perhaps you just need a cost-effective solution for a particular incident or event. An Umbrella Insurance policy can help cover liability that extends beyond what's covered in your primary insurance policy.
Who Needs Umbrella Insurance?
Any business can benefit from having an Umbrella Insurance policy. Particularly, high-risk businesses and high-liability industries like medical or law professionals.
What Does Umbrella Insurance Cover?
Umbrella Insurance is designed to extend the coverage of your existing policies, e.g. General Liability, Commercial Auto insurance, or Workers' Compensation insurance.
Some policies can also cover gaps in what your business is covered for. For example, if your General Liability Insurance doesn't cover lawsuits or slander, an Umbrella policy may be used to cover legal expenses from those claims.
Moreover, there might be other reasons a business might need to increase or extend its existing insurance coverage. A one-off event, or temporary workforce. Umbrella Insurance policies offer a cost-effective way to extend the coverage of existing policies.
What Doesn't Umbrella Insurance Cover?
Generally, Umbrella Insurance extends the coverage of your existing liability insurance policies, but not all of them.
For example, if you have a $500K General Liability insurance policy, but a claim ends up costing $750K. Your Umbrella policy would only cover the remaining $250K, only if your Umbrella Insurance is underwritten for that amount or more.
Another scenario would be if a business doesn't have Commercial Auto insurance the vehicle's driver, or business owner, has an accident, an Umbrella policy would most likely NOT cover those expenses. (A Commercial Auto Insurance policy is highly recommended for any business with a fleet, even it's just one vehicle).
Lastly, Umbrella Insurance policies do not cover personal liability claims against you, the business owner. Since policies tend to vary from company to company, it's best to check the exact coverage of your policy before purchasing.
What's a Situation You Would Need Umbrella Insurance?
Any company that experiences an event that surpasses the amount of their existing liability insurance policies may need additional Umbrella Insurance.
For instance, you own the location that houses your business, and you carry a $1 million Commercial Property Insurance policy. However, a 100-year-old oak tree next to the shop falls over and destroys the building, costing $1.5 million to rebuild.
Without Umbrella Insurance, you would be out the remaining $500K necessary to rebuild your shop or business. If you have a $1 million umbrella policy that covers commercial property, your expenses will be covered.
How Much Does Umbrella Insurance Cost?
As with any insurance, the cost of your policy will depend on several factors. The amount of coverage, your industry, your expertise, and how long you've been in business all factor into the policy premium.
On average, a $1 million Umbrella Insurance policy will cost you between $200-$400 per year, which may be less expensive than extending your other policy(s) by the equivalent amount.
Where Can You Get Umbrella Insurance?
Multiple insurance providers offer umbrella insurance. Be sure to shop around and find the policy that matches your budget and policy needs. Cover Wallet and biBERK are two companies that carry umbrella insurance.
Learn more about 12 other types of insurance, take a look at our Ultimate Guide to Selecting Business Insurance.
Disclaimer: Skip does not endorse, nor is affiliated with either of the companies mentioned in this article. They are referenced here for informational purposes only. Always conduct your own research before purchasing any insurance policy.
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