When you have one or more forms of standard business liability policies, such as auto liability or general liability, you may decide to maximize coverage with an umbrella policy. The amount of extra protection needed depends on various factors, including your industry and inherent risks. Read on to learn more about determining the right limits for your commercial umbrella insurance policy.
Why Do You Need Commercial Umbrella Insurance?
You probably have your business covered for general liability, auto liability, and other common forms of third-party issues/risks. These policies may not always provide sufficient protection. If customers or people you’re doing business with sue your company for injury or property damage, you may need more than standard liability protection to fully cover such claims.
When you take out a commercial umbrella policy, you get additional liability coverage. The extra protection can shield your business from paying out of pocket for compensatory damages, settlements, or other third-party claims. It will usually kick in after you’ve exhausted your basic policy limit.
What Is the Difference Between Umbrella Insurance and Excess Liability Coverage?
Both policies provide extra protection. However, excess liability coverage only adds to a single standard policy, such as auto liability. An umbrella policy adds coverage to multiple business liability policies. It’s usually a more cost-effective way to expand your commercial liability protections. Note that umbrella insurance limits are increased by $1,000,000, and each increment costs less than the previous limit.
How Much Commercial Umbrella Liability Coverage Do You Need?
Consider these factors to work out your business’s extra liability coverage requirements:
- Contractual obligations – Some customers/clients may require you to have a certain amount of commercial liability insurance before giving you any business. For example, a contractor may need proof of $4,000,000 liability coverage. If your standard policy has a $2,000,000 limit, you can get an umbrella policy with a $2,000,000 limit to satisfy this requirement.
- Your company’s net worth – An evaluation of your company’s worth is a good pointer to what is at stake and how much protection is needed. The higher the value of your assets, the more you could potentially lose in a liability lawsuit.
- Size/scope of risky operations – Factors like the number of vehicles, employees, or customers who enter your business premises every day usually influence your umbrella insurance coverage needs. For example, if you have a large automobile fleet, you face a higher risk of employee or third-party injury and property damage claims than a company with only a few vehicles.
- Your industry – Risk profiles vary by industry and business type. For example, a construction company faces a higher personal injury liability risk every day than a real estate agent or financial advisor. Therefore, make sure to identify the risks inherent to your industry and expand your coverage limits accordingly.
If you’re a member of a professional association, you may consult your peers about the necessary insurance protection. Members operating businesses similar to yours may share more precise information on typical coverage requirements for companies in your industry. Also, don’t hesitate to discuss your needs with experts who can help evaluate your liability risks and shed light on the specific limits that companies similar to yours in size or industry are carrying.
Liability coverage needs vary based on different factors. To determine the right commercial umbrella insurance limits for your business, make sure to evaluate your risks thoroughly. Maximizing liability protection can prevent substantial financial loss resulting from third-party claims or lawsuits.
Interested in finding the right business insurance for your company? Then turn to the experts at Sausman Insurance Agency. Our team is ready to assist you with all your insurance needs. Contact us to get started today.