You may have general liability insurance for your business, but this policy limits your coverage. For example, if someone gets injured in your store, he or she may sue you for their injuries. You may think that this is not an issue because you have general liability insurance coverage, but what if the jury awards an amount that exceeds the limits of your policy?
In this case, your insurance company would cover the amount of the plaintiff’s award up to the limits of the policy. Then, as the business owner, you would be personally responsible for paying the remainder of the award. For example, if your insurance company makes a contract to pay the aggregate limit of liability of $1 million during the policy’s term, the insurance company would pay $1 million if there is ever a judgment against you for a personal injury claim.
Suppose that the jury awards the plaintiff $1.5 million. You would not have to worry about the $1 million, but the $500,000 would be your responsibility. Business owners are not always prepared to meet this type of expense, but an umbrella insurance policy would be a lifesaver.
What Is Commercial Umbrella Insurance?
Commercial umbrella insurance covers the amount beyond the limits of your general liability insurance policy. In the example above, your insurance pays $1 million of the plaintiff’s award, but your umbrella insurance policy pays the remaining $500,000. Without this extra coverage, you may lose your business because you may need to sell your property to collect the money to pay the plaintiff. Commercial umbrella insurance ensures that you never have to do this if this situation occurs.
What Does Commercial Umbrella Insurance Cover?
Commercial umbrella insurance pays for the following expenses that are not covered under a general liability policy:
- Judgements and settlements
- Damages to third-party property
- Medical bills
- Legal expenses
Who Needs Commercial Umbrella Insurance?
A business in which you interact directly with clients is the type of business that is the most susceptible to lawsuits. That is because the risk of bodily injury is very high for these types of businesses. For example, if you have employees who restock your shelves with heavy machinery during business hours, there is a risk that a customer could be injured.
If your business works on other people’s property, you need a commercial umbrella insurance policy as well. Working on location increases your liability risks because of the possibility of property damage.
What Are the Limits of Commercial Umbrella Insurance Policies?
The aggregate limits of a commercial umbrella insurance policy range from $1 million to $15 million. These limits are the maximum amount that your insurance company will pay for any covered claims. The amount you will pay for this policy will depend on the size of your business, the type of business, the limit amounts, and the amount of underlying coverage.
Along with commercial umbrella insurance, you may be able to increase your coverage with endorsements, such as fire legal liability insurance, directors and officers liability insurance, employment practices liability insurance, and hired and non-owned auto liability insurance. One of these insurance types may be right for you.
