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Top Reasons To Buy Commercial Umbrella Insurance

Business owners typically purchase commercial umbrella insurance to satisfy a contract that requires more coverage than what a standard policy provides. Commercial umbrella insurance provides additional liability coverage for the most costly lawsuits, which is crucial irrespective of your type of business.

For example, if your business is sued for $5 million and your business liability coverage is limited to $4 million, the commercial umbrella insurance policy will cover the $1 million difference.

That $1 million can be the difference between your company staying in business or closing. Now let's look at some of the other top reasons to purchase commercial umbrella insurance.

Top Reasons to Buy Commercial Umbrella Insurance

High Risk for Lawsuits

Buying commercial umbrella insurance is a straightforward decision if your business is at high risk for a lawsuit. Interestingly, almost all businesses fit this description, as employees and clients make a lawsuit a strong possibility.

Every business has severe exposure. For instance, your retail business stakeholders could be exposed to premises safety. Restaurants face foodborne illness concerns, while contractors are exposed to risks such as falling from high places.

Guarantee Business Continuity

Many businesses struggle to settle liability claims levied against them. For instance, judgment awards, legal costs, and claims outside the existing policy limit can collapse a business. Commercial umbrella insurance can provide the added cushion to guarantee business continuity by paying for defense costs, large claims, and those in faraway jurisdictions.

Increasing Losses

Multimillion dollar settlements are becoming more prevalent in recent times. For example, medical technology and prescription drug advancements have increased the expense of medical treatment, and international liability is on the rise.

Commercial Property Is Open to the Public

You are exposed to risks when your commercial property is accessible to the public and outsiders are welcome to your premises. It doesn’t matter whether you own the premises or rent it. Anybody who walks onto your property, including your staff, customers, vendors, and even trespassers, has limited protection under your commercial premises liability policy.

Litigation can arise if somebody is injured on your premises or a staff member behaves inappropriately. Unfortunately, the litigation can quickly deplete your general liability coverage, and that is where your commercial umbrella insurance can come in handy.

Contractual Obligation to Carry Commercial Umbrella Insurance

Commercial umbrella insurance may not be necessary unless a contract or landlord demands it. Some businesses are contractually obligated to carry commercial umbrella insurance, which is usually the case with most government deals.

However, some customers may also require your business to carry commercial umbrella insurance. Even when it is not obligatory, business umbrella insurance can protect both your business and client if exposed to potentially large liability risks.

Auto Exposure Protection

Recent statistics suggest 671 accidents occurred since 2021 with 702 fatalities. Automobile accidents are a major reason for umbrella claims. The more miles you drive, the more likely you are to be in an accident involving your business. Large commercial trucks are equally likely to be involved in a serious collision as compact cars because of the increased distractions caused by GPS, phone calls, and texting.

It can be useful for businesses with a fleet of vehicles to safeguard against the costs of auto accidents.

Staff Work on Other Properties

Your business may require you or your staff to work on others’ property. While on their property, accidents may occur. Even unintentional property damage may cause costly lawsuits. For this reason, having a commercial umbrella insurance policy can give you and your staff the peace of mind you need to perform your daily business activities.

Cost of Commercial Umbrella Insurance

According to an insurance marketplace, commercial umbrella insurance costs roughly $40 per month for every $1 million in coverage. However, charges vary depending on your industry. Manufacturing and construction businesses are likely to pay more than professional services and low-risk businesses.

However, understand that no insurance policy offers unlimited coverage. Some things not covered under commercial umbrella insurance include errors and omissions, penalties or lawsuits from breaking the law, claims exceeding umbrella policy limits, and failing to have proper underlying policies.

How to Purchase Commercial Umbrella Insurance

Since many insurance providers offer discounts for insurance bundles, it would be best to begin your search with your current provider. Likewise, it is more convenient to deal with a single provider if you need to file a claim. Most insurance companies provide business umbrella insurance plans.

Major Takeaways From Commercial Umbrella Insurance

As we've detailed, commercial umbrella insurance can benefit your business. However, it's important to keep the following points in mind when comparing commercial umbrella insurance rates and to weigh your options:

  • Before purchasing commercial umbrella insurance, you need at least one general liability, commercial auto insurance, or employer's liability policy.
  • Business umbrella insurance does not operate with commercial property insurance. It may supplement other policies such as commercial auto insurance, general liability, and employer's liability, yet you cannot use it to cover damage to company property.
  • Commercial umbrella insurance is available in $1 million increments. Small businesses can enhance their litigation protection in $1 million increments, allowing them to purchase the exact coverage they require.

Despite the misconception that commercial umbrella insurance covers everything, your business still needs other business coverage. Consider commercial umbrella insurance as a safety net for any claims exceeding your primary policy.