For businesses that desire that extra layer of protection, the umbrella policy is available. Most often, the umbrella policy is used to provide protection against catastrophic losses. It provides additional liability coverage, usually in increments of $1 million, and is written over your other liability policies such as your Commercial General Liability Policy, Business Auto Policy, Employers Liability Policy, etc...
Umbrella policies are no longer used just for businesses with significant sales or hundreds of employees. In fact, there are many businesses operating as sole proprietors that include an umbrella policy in their insurance program. And why not? Historically, the average claim settlement amount has not been decreasing.
Example. Imagine you're operating as a local handyman and you don't have any employees. You have a great reputation for providing high-quality workmanship so you have the name of your business printed on your truck to help increase awareness of your business. One busy day, you're in a hurry to start a new job and you rear-end a school bus in your truck that advertises your business. Injuries and damages are estimated at $1.7 million. Of course, since the name of your business was on your truck, you and your business are invited to the lawsuit party. You were diligent and had $1 million liability coverage on your business auto policy. But that policy alone will leave you to pay the $700,000 balance. A $1million umbrella policy could have protected you and your business in this situation.
Tip. Since umbrella polices provide protection once your General Liability, Business Auto and other underlying policy limits have been exhausted, they're usually less expensive than increasing the limits on each underlying policy. Ask your agent to give you an idea of what the premium would be to add an umbrella policy to your insurance protection program. Once the loss occurs, the premium you would have paid becomes irrelevant.
To learn more about your insurance protection, visit our Learning Center or contact one of our licensed advisors. We're here to help!