While an Umbrella insurance policy is good to have for an individual or a family, it is essential for a business.
So let us start with basics. What is Umbrella insurance? An Umbrella insurance policy covers a business, up to the coverage value of the policy over and above the maximum limits for each of the risks covered; in addition it covers for some other risks for which there is no specified coverage either through a rider in one of the insurance policies or a separate insurance policy.
Risks which are covered over and above the insurance policies or riders which most businesses have. Again these are risks which you probably have an insurance for already.
Personal injury–e.g. a visitor slips and falls in your lobby.
Personal property damage–e.g. vehicle colliding with another–where one of the vehicles is yours.
Real property coverages–damage to the building, rental unit etc.
Malpractice or Professional Negligence–businesses do not always have coverage except in cases where there is history of litigation–e.g. medical malpratice.
Additional risks covered (generally businesses do not insure against these risks): litigation resulting from slander, mental disturbance or anguish, emotional injury, libel.
You should remember that in any claim, the Umbrella insurer will first want you to get paid under your primary insurance policy; theirs will kick in when you have maxed out on your primary insurance. So in the end the Umbrella insurance is protective insurance against catastrophic risks that could shut down your business, or cost you enormous sums in litigation.
Indeed, Umbrella insurance is and should be part of your business protection suite of products, much like you have credit card insurance or fraud insurance. Unfortunately, ours is a litigious society. There are hundreds of attorneys who core competency is advising victims, real or imagined, to enter into litigation, or at least threaten to, in order to elicit the best “offer” they can get.
I do not mean to suggest that litigation over injury, emotional disturbance etc. is always, or even mostly egregious.
So how should you go about determining what you need. A few tips:
- talk to your insurance agent. He or she is a professional who is versatile not only evaluating business needs but also in sharing experience.
- depending upon your business size and the industry you are in, you want to be with the larger firm rather than smaller. Larger insurance firms have more resources in case they need to negotiate a settlement, they also have access to excellent lawyers. The extra money you pay for their “brand” is often worth it.
- Talk to your friendly competitor, or even key vendors. They can share their experience with you and give you a good market sturdy.
- Make sure your primary insurance package is good. It should not only cover you for common risks, but also the coverage should be sufficient. Do not under insure to save a few dollars.