Umbrella liability insurance
Excess liability insurance, more commonly known as umbrella insurance, is one of the most important types of insurance your company can buy. It protects your business from holes or limits in existing policy coverage as well as from financially draining lawsuits.
Just as you carry an umbrella to protect you from a potential downpour, an umbrella policy protects your company from the types of claims that could close your business.
What is umbrella insurance?
Umbrella policies back up the limits contained in their underlying liability policies (commercial general liability, business auto, employer liability, workers’ compensation and professional liability.) For the most part, it is used to cover exceptionally large events or losses with low probabilities of occurrence. Without it, these events – as few and far between as they may be – would be financially devastating to many companies.
Does my business need excess coverage?
All types of companies would benefit largely from umbrella coverage. Because it extends coverage so dramatically at a relatively small additional cost, many choose to pay the extra price. The amount of coverage needed will always depend on the total value of your assets.
Benefits of umbrella coverage
Paying liabilities in excess of existing policy limits
Provides coverage for potential damages and court defense fees that exceed underlying insurance policies (typically commercial general liability policies).
Providing coverage in areas not included with existing policies
Provides coverage in situations that are not covered by underlying insurance policies but are not excluded from the umbrella policy. This benefit is subject to a self-insured retention (SIR), similar to a deductible, in which the policy holder is responsible for losses up to the SIR amount.
Additional limits to policies
Applies to claims where the aggregate limit of the underlying policy has been met. The umbrella policy will cover the portion of the claim that cannot be paid with the underlying policy because there are not enough funds available in the policy to cover the entire claim.