What is business Umbrella insurance?
Business umbrella insurance offers extra limits of coverage beyond the base insurance of the underlying policy. An underlying policy may include workers’ compensation, commercial auto, or general liability.
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Without such a policy, you will be responsible for the expenses that go beyond the limit of your coverage. For example, you will have to pay for costs such as medical charges, damage charges, or legal fees.
A business umbrella cover is more like personal umbrella insurance. The only difference is that personal umbrella coverage increases renters insurance, home insurance, and auto insurance.
For instance, if the damages of an individual’s car accident go beyond what is stipulated in the auto insurance cover, then a personal umbrella insurance policy will bridge the difference. Or if a person is sued for a dog bite and their homeowner insurance is unable to cover all the damages, then an umbrella coverage will pay for the balance.
What’s covered in a business umbrella policy?
A business umbrella policy offers additional coverage for different liability insurance types through an extension of the primary policy. This means if you don’t have the policy to begin with, then there will be nothing to be covered by the umbrella insurance.
Most insurance companies have umbrella insurance covers with aggregate limits. The limits can range from $1 million to $3 million. This implies that your insurance company can only cover you up to that limit.
Take, for instance; you have a worker’s compensation policy that has an insurance cut off limit of $3 million. This means if an employee sues your company and the court orders for a compensation of $4million, the insurance company is obligated to only pay up to $3 million. The only thing that can save you from this situation is a business umbrella policy.
Who should buy a business umbrella insurance?
The nature of your business should dictate whether it needs a business insurance cover or not.
For example, if your business engages many customers every day, the risk of liability will also be high. The risk can even be more significant if your company or industry involves the use of heavy machinery by employees.
As a business owner, you should consider an umbrella insurance cover if you believe that the cost of claims or a claim might surpass the liability limits. It would be good to seek advice from a legal expert or insurance company to determine the probability of a claim exceeding the limit allocated for that specific cover.
A business umbrella insurance will be a good idea if your business or company:
- Frequently engages with customers.
- Has contracts on people’s property
- It is open to the public.
- Involves the use of heavy machinery
- Deals with sensitive services or products
If the public has access to your business premise or premises, there is an increased risk of bodily injury. This means that your business or company can be sued at any time for workplace injury and slapped with a hefty penalty or claim.
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- Third-party body injury – When you include a business umbrella cover to your existing general liability insurance, it will be able to cover legal or medical expenses in case the customer injures himself or herself within your building. For instance, a customer walks into a boutique, trips on an uneven staircase, and sustains a severe injury in the process. He or she decides to sue your business demanding $2 million to cover the medical expenses. If your general liability limit was only $1 million, then the umbrella policy will cover the rest.
- Third-party property damage – Having a business umbrella insurance policy will also help you replace or repair a customer’s damaged property if they sue you and the court orders to pay for an excess amount than the one stipulated in the general liability insurance cover.
- Auto accidents – If you have an umbrella policy for your business, you will easily cover the expenses or costs incurred in paying for the damages caused by your vehicle. For example, if one of your company vehicles gets involved in an accident and seriously injured a pedestrian. If the medical claim is higher than the limit set for your auto insurance, then the umbrella insurance policy will cover it.
- Employee injuries – A business umbrella insurance will also protect you against employees’ possible lawsuits because of work injuries. Employee injury lawsuits are common in companies involved in manufacturing. That’s why you should consider umbrella insurance to stay safe.
How much does a business umbrella insurance cost?
Three essential things can determine the cost of business insurance. They include the following:
- Your type of business
- The size of your business
- The amount of the underlying coverage
However, it is essential to note that some sectors face more risks than others, which can also raise the cost of a business umbrella insurance cover.
For example, a person operating a construction company is likely to have a more expensive umbrella cover than running a retail business.
What is not covered by a business umbrella insurance?
- Punitive damages – Punitive damages are monetary punishments issued by a court if a business has committed illegality. A business umbrella insurance won’t cover such cases.
- Personal liability claims – It is important to note that commercial umbrella insurance is only applicable to professional business matters. It cannot cover anything outside of that, such as personal liability claims. For example, if an attorney in a legal firm faces slander or libel issues, then an insurance company won’t cover that.
In general, business umbrella insurance is essential for almost every business – especially those that deal with a lot of customers.
Companies or businesses whose employees regularly use heavy and dangerous machinery also ought to have business umbrella insurance.