Insurance Maze Blog

Feb 27

Business Insurance - Business Umbrella Liability

Category: Business Insurance post

February 27, 2008

Just as the name implies, “Umbrella Liability Insurance” covers or provides extra liability insurance coverage to supplement your existing general liability and commercial auto policies.

Umbrella Liability Provides Two Kinds of Coverage:

Pays amounts that exceed the “per occurrence” or “aggregate limit” provided by your general liability or commercial auto policies.
Pays liability losses which may not even be covered under the base insurance policy.

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How Business Umbrella Liability Works

Let’s assume that your business has been found at fault in a liability claim that required $2 Million to settle and the aggregate limit of your general liability policy is $1 Million. Here’s what could happen:

Your insurance company would pay the $1 Million
Your business would be responsible for the other $1 Million
A $5 Million Business Umbrella Liability Policy would have picked up the slack and would have paid the remaining $1 Million and left your business with $4 Million in extra liability protection.

Key Factors In Designing Your Business Umbrella Liability Policy

Obviously, you want to have enough extra liability coverage, but there is really no sense in going overboard either. Umbrella liability is usually sold in increments of $1 Million. Your business insurance agent needs to help you decide on the right amount, considering:

Liability exposure of your business
Reputation of the courts in your area
Your budget

Business Umbrella Liability and Your Home Business

Keep in mind, the umbrella liability only supplements what the original base policy covers. If your home business is not covered in the general liability or homeowner’s policy, the umbrella won’t cover it either. If you have designed your business insurance program to protect your home business, then an umbrella liability policy will offer the added protection you just might need.

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