When does a business need umbrella insurance?

Umbrella insurance is relatively new, but it can be an extremely valuable coverage to businesses that operate on tight profit margins.  This coverage is meant to cover a variety of scenarios that can easily throw a small business into a tailspin.

Umbrella policies are designed to pay for events when a business’ primary insurance policy will no longer pay.  Depending on exactly how the policy is written, this can mean that the policy covers damages beyond a coverage cap set by the primary policy and/or it covers expenses that are not covered by the primary insurance policy.

Typically, businesses that are at high risk of having claims made against them are good candidates for umbrella insurance.  Contractors and other construction businesses, for example, are at risk for expensive and frequent worker’s compensation and customer claims.  While a primary insurance policy would pay for a good portion of these claims, a month with an unusually high number of claims could easily reach a company’s coverage limit.  This is where the umbrella policy would kick in and pay for these “extra” claims.

An umbrella policy can also provide coverage for items that are not part of a primary policy.  For example, it can provide funds to replace lost income or other secondary expenses in the event of a natural disaster or other types of claim on a primary policy.  These expenses could include help with legal fees, legal settlements, lost wages for workers, and/or insurance deductibles.

Every umbrella policy is different.  That’s why it’s important to talk to the agents at 1st American Insurance Agency to figure out the terms and conditions of an umbrella policy that’s right for you.