What Is a Commercial Umbrella Policy and How Does It Benefit a Business?

Insurance for business is a financial cushion for when the unexpected happens. The unexpected, in this case, can be an accident, a natural disaster, mistakes, etc. Unfortunately, your insurer will only come to the rescue if you’re within your coverage limit, so what happens when you exceed it?

If you exceed your coverage limit, you’ll have to pay for any costs above the stipulated limit. This could deal a heavy financial blow to your business if it catches you off-guard. Fortunately, a commercial umbrella policy can extend liability coverage for businesses when things go from bad to worse.

This post will look at what a commercial umbrella policy is and why it’s so important for businesses large and small.

What Is a Commercial Umbrella Policy?

A commercial umbrella or excess liability policy is a special type of insurance policy beyond your usual liability coverage. It provides you with extra coverage for costs that exceed your primary liability coverage limits. With a commercial umbrella policy, you don’t have to pay out-of-pocket expenses should you exceed your liability coverage limit.

The commercial umbrella policy covers costs like:

  • Legal fees
  • Settlements
  • Property damage
  • Medical costs

Commercial umbrella policy is a staple for large businesses, but small businesses are starting to see its importance. While your standard liability policy covers you for any serious incidents, you need to prepare for when the issue escalates. Taking out an umbrella policy is one way to protect your business when things take a turn for the worst.

How Does Umbrella Coverage for a Business Work?

Businesses purchase standard liability policies like cyber liability and general liability insurance. These policies have limits that the insurance holder must remain within so they don’t pay any extra out-of-pocket costs.

An umbrella policy extends the coverage limits of your liability policies. Most insurers extend coverage to policies you have with other insurers. However, some only offer umbrella coverage for policies taken out within their companies.

When your employee gets into an accident and ends up hurting themselves and also damages private property, the insurer should cover property damage costs, car repair costs, and your employee’s medical bill. However, when you crunch the numbers, you realize that the total costs exceed your business insurance policy limit.

Since you also have a commercial umbrella policy, the insurer steps in to take care of the extra costs above your coverage limit. If you didn’t have commercial umbrella insurance, you’d have to pay for all the extra costs. Talk about throwing you a lifeline.

What Does Commercial Umbrella Policy Cover?

A commercial umbrella policy will extend the claims of the following:

Bodily injury- Covers medical and associated costs of an injured employee, customer, or a third-party.

Property damage- Covers any damage that your employees or products cause to someone else’s property.

Court Costs- Covers any legal fees in case your company is in a legal tussle. Keep in mind that legal fees are known to skyrocket without warning.

These are just a few examples of what a commercial umbrella policy covers. Note that the type of coverage you get from an umbrella policy depends on your line of business. For instance, if you own a brewery, then your umbrella policy might include liquor liability coverage.

This policy sometimes covers policies that your standard liability policy doesn’t cover. For instance, your umbrella policy can cover advertising injury liability even if you don’t have it as a primary liability policy.

What Doesn’t Commercial Umbrella Insurance Cover?

Contrary to popular thought, commercial umbrella insurance doesn’t cover every type of claim. That’s because some claims would be too expensive, even for an umbrella policy.

Commercial umbrella insurance doesn’t cover commercial property insurance because it’s just too costly. If fire razes down your entire business, the commercial property insurance only covers a fraction of the damage. Covering for repairs and replacement of your commercial property will prove too expensive for the insurer.

This is just an example of a policy not covered by commercial umbrella insurance. Talk with your umbrella insurance provider to find out what policies the insurance covers.

Why Is Commercial Umbrella Insurance Beneficial?

Businesses both large and small can benefit from a comprehensive commercial insurance policy. You don’t need to crash into a neighboring store to benefit from commercial umbrella insurance. Sometimes minor incidences like a slip and fall can do your business in.

While your insurer may cover bodily injury costs, the legal costs may exceed your coverage limits. That means you’ll have to break the bank to pay for the legal and defense fees. If you have a commercial umbrella policy, you can let your insurer handle the legal fees and save your business a nice chunk of change.

Simply put, commercial umbrella insurance is great for all types of business, regardless of niche and size.

Customized Umbrella Policies

Insurers may offer customized umbrella policies for your specific business. You can tailor your umbrella policy to align with your business needs. This is what is known as a custom commercial umbrella policy.

Before you can purchase a custom umbrella policy, your insurer will need the following information from you.

  • Details of any previous losses your business experienced
  • Your yearly payroll and employee details
  • Your company’s financial breakdown
  • Information about your company’s operations

The above information should help the insurer know how best to craft a customized umbrella policy for your business. Keep in mind that not all insurers offer customized umbrella policies.

Your Business Needs an Umbrella Policy

It’s a good idea to get a commercial umbrella policy for your business to be on the safe side. Whether you own a big or small business, you can never go wrong with an umbrella policy. However, make sure you pick a reputable insurance provider for the best results.

You deserve only the best. Contact us today for flexible and comprehensive commercial umbrella insurance.