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Commercial Umbrella Insurance: A Guide

Dealing with the unexpected can be quite complicated. Without appropriate insurance coverage, unforeseen events can cause serious issues for your business. Insurance policies such as General Liability Insurance (GLI), commercial auto coverage, or a Business Owner’s Policy (BOP) are all highly effective ways of protecting your business.

However, there are unexpected situations that may exceed your current policy limits. In such cases, a commercial umbrella insurance policy can save the day. This article will discuss what commercial umbrella insurance is. Moreover, we will explore how a commercial umbrella policy can protect your business.

What Is Commercial Umbrella Insurance?

Commercial umbrella insurance is a policy designed to provide your business with additional protection. GLI or BOP coverage typically has coverage limits. For instance, most GLI or BOP policies range from $250,000 to $1 million in coverage.

But what happens if an event exceeds your policy coverage?

In such cases, your business would have to cover the difference.

Consider this situation:

Your company does air conditioning installation and service. There is a mishap during the installation, and one of the workers breaks a window. In this situation, your company’s GLI would cover the cost to repair the client’s window.

Now, imagine this situation. During the installation, there is a short circuit causing a fire. The fire causes significant damage to the client’s property. In this scenario, your GLI may not have enough coverage to pay for the damages.

This point is where commercial umbrella insurance comes to the rescue.

A commercial umbrella insurance policy can cover claims that exceed your standard GLI or BOP coverage. Thus, the commercial umbrella policy intends to be there for a rainy day. Typical, these are the claims commercial umbrella insurance covers:

·       Legal fees

·       Medical and hospital expenses

·       Damage to third-party property

·       Settlements and fines

Commercial umbrella coverage can protect your business for as much as you need. For example, some companies use commercial umbrella insurance to supplement commercial auto insurance. The commercial umbrella policy would supplement claims that exceed the limits on the commercial auto policy.

You might ask, “why don’t you just get a higher limit on your commercial auto policy?”

While that makes sense, please bear in mind that mishaps can happen anywhere. Consequently, a commercial auto policy covers just one type of incident. In contrast, a commercial umbrella policy covers multiple situations.

Please keep in mind that commercial umbrella insurance doesn’t cover every type of claim. The commercial umbrella mainly focuses on third-party liability. Therefore, damage to the business’s owned property does not fall under commercial umbrella coverage.

For example, a flood destroys a significant amount of equipment. BOP would cover the damages to the equipment. However, if the replacement cost exceeds the policy coverage, the business would have to pay for the difference.

In this case, commercial umbrella insurance does not cover business property. Ideally, the business would have sufficient coverage to make up the replacement cost.

Business of all sorts needs commercial umbrella insurance. In particular, businesses with these characteristics should get commercial umbrella insurance:

·       Frequent interaction with customers.

·       Does work on third-party property.

·       Has visitors on the premises.

·       Uses vehicles or machinery.

·       High risk of an accident.

Also, businesses that have employees must consider commercial umbrella coverage as it can supplement workers’ compensation. As such, commercial umbrella coverage can help cover the costs of an employee’s medical expenses resulting from a work-related incident.

In general, a commercial umbrella policy costs about $450 a year for every $1 million in coverage. You choose the amount you need based on your business’s characteristics.

What Are the Types of Commercial Umbrella Insurance?

Commercial umbrella insurance works to supplement your business’s existing policy limits. As such, you are getting to know the various types of commercial umbrella insurance can help you make the right choice for your company.

Let’s look at the two main ways commercial umbrella insurance can help your business. First, commercial umbrella insurance can serve as an add-on to GLI. Here are some examples:

·       Small businesses with busy stores can use commercial umbrella insurance to guard against lawsuits from customers or visitors.

·       Freelancers need commercial umbrella coverage when working with expensive equipment. For instance, a client asks for a higher policy limit before a freelancer can use their equipment.

·       A home business uses commercial umbrella coverage to protect against lawsuits over intellectual property.

In these examples, a commercial umbrella policy covers claims that exceed current GLI policy limits. As a result, commercial umbrella coverage protects these businesses from covering excess costs out of pocket.

Now, let’s examine how commercial umbrella insurance can serve as an add-on to a commercial auto policy.

·       A small taxi service company operates various vehicles. The cost of minor accidents quickly adds up, eventually exceeding its commercial auto policy.

·       A freelancer drives to see a client. Along the way, they get into an accident. The damage caused to third-party property exceeds the freelancer’s current auto policy.

·       A home business’s delivery driver gets into a wreck. The medical bills for the third party exceed the business’s commercial auto policy.

In the examples above, a commercial umbrella policy serves to supplement excess costs resulting from accidents. It is especially useful in serious accident situations.

Let’s now move on to other specific examples of how commercial umbrella insurance can help supplement regular business insurance.

General Contractors

Contractors must have GLI or BOP. However, commercial umbrella insurance is a good idea in case of serious damages. For example, a plumber does not repair a pipe correctly. The client’s basement floods causing thousands of dollars in damages. In this case, the repairs may exceed their GLI’s policy limits.

Construction Companies

Construction companies have a higher risk than other businesses. They often operate heavy machinery and expose workers to risky situations. As such, commercial umbrella coverage can supplement GLI and workers’ compensation.

For instance, a bulldozer accidentally knocks over a telephone and injures an employee. A commercial umbrella policy can cover both the repairs to the pole and the employee’s medical bills.

Commercial Trucking Companies

Commercial trucking companies need commercial auto insurance. However, commercial auto coverage may be insufficient to cover a serious wreck. Moreover, if there are several wrecks in a short timeframe, the commercial auto policy may quickly run out.

A commercial umbrella policy can kick in as an extension to the regular commercial auto policy in these scenarios.

Factories

Manufacturers need commercial umbrella coverage to help protect machinery, tools, and raw materials. BOP generally covers all of these items. However, when replacement costs exceed a BOP’s limits, a commercial umbrella policy can save the day.

How Can Commercial Umbrella Insurance Protect Employees During the COVID-19 Crisis?

The COVID-19 pandemic has caused serious issues to both employees and businesses alike. In particular, enterprises operating throughout the pandemic expose their workers to potential infection. In such cases, employees may get seriously sick.

Depending on the circumstances, employees may seek workers’ compensation benefits to cover their medical bills. Nevertheless, please note that most COVID-19-related expenses would fall under health insurance coverage and not necessarily workers’ compensation.

Let’s differentiate both scenarios.

A traditional health insurance plan would cover a workers’ medical bills resulting from a COVID-19 infection. These health insurance plans are often benefits companies offer their employees. Employees can choose to pay an extra fee to include dependents or increase their coverage.

A workers’ compensation claim can cover an individuals’ expenses related to a COVID-19 infection. However, the worker would need to show that their infection was the direct result of their job.

This point is where it gets tricky.

Firstly, the worker would have to demonstrate that their job puts them at risk of infection. For example, hospital workers can claim they got sick while caring for infected patients.

Secondly, if the effects of the infection cause significant disability, the worker can claim workers’ compensation. However, workers need to document the extent of their claims.

Also, workers must demonstrate they weren’t negligent while performing their duties. Negligent employees cannot claim workers’ compensation. For instance, an employee that does not follow recommended safety guidelines can become negligent. Therefore, the infection is their responsibility.

Commercial umbrella coverage can help companies supplement workers’ compensation claims stemming from a COVID-19 infection. Depending on the severity of the illness, a company’s workers’ compensation policy can run out. Therefore, supplemental insurance makes sense.

Businesses should consider taking out a temporary commercial umbrella policy to cover COVID-19-related expenses. Companies can then choose to keep the coverage or not after the pandemic is over.

Nevertheless, companies that place workers at high risk should consider keeping commercial umbrella coverage permanently. Given its relatively low cost, it makes sense to keep commercial umbrella insurance on hand.

Please bear in mind that you can tweak your policy coverage to suit your needs. For example, if your company takes on a large project, you can up your coverage during the project. You can then scale back down following the project’s completion.

Most importantly, insurers build commercial umbrella policies to suit all types of businesses. Therefore, you can work with your insurer to create a policy that makes sense for your business. This approach makes commercial umbrella coverage affordable while protecting your business’s livelihood.

How Much Commercial Umbrella Should Companies Get?

In short, larger companies need more coverage than smaller ones. Nevertheless, there are various factors that you need to consider. These factors will help you determine the coverage that’s right for your business.

Overall size

Your business’s size is the first element to consider. A home business may not need more than a $1 million GLI policy. However, a company that has a busy storefront may need a supplemental commercial umbrella policy.

In contrast, a large company with several hundred employees may require $5 or $10 million in coverage. After all, fires, accidents, and natural disasters can quickly cause enormous losses. On average individual professionals pay roughly $450 annually, while large construction and contracting firms pay more than $1,500 a year.

Risk Level

Naturally, businesses with a higher risk level need more coverage. Companies that operate a vehicle fleet operate heavy machinery or have heavy foot traffic need higher coverages. In addition to GLI, a solid commercial umbrella policy can cover unexpected incidents.

Additionally, companies with a large number of employees need robust commercial umbrella coverage. If your business hires seasonal or temporary workers, you ought to consider a temporary commercial umbrella policy. This policy can cover workers’ compensation and general liability issues.

Type of Business

Some businesses have specific insurance requirements. For instance, clients may request a contractor to have a specific coverage amount. In such cases, contractors can purchase a temporary policy for the project’s duration. Also, companies with government contracts need to fulfill certain coverage amounts.

By law, companies with commercial vehicles need commercial auto insurance. However, most states require roughly $25,000 to $50,000 in coverage. This coverage amount might be insufficient in a serious collision. Consequently, purchasing a commercial umbrella policy can help keep costs down while protecting the company.

Keeping Costs Down

Commercial umbrella policies can start as little as $40 a month. Most insurers sell these policies in $1 million increments. As such, a $2 million policy could cost $80 a month or $120 for $3 million. However, shopping around can score you a good deal.

Please bear in mind that getting a commercial umbrella policy with a different insurer can help you save. So, you can keep your current insurance and purchase an additional commercial umbrella policy with a separate insurer.

Bundle and Save

However, you can always ask your current insurer to offer you a bundle deal. Some insurers are willing to give their existing customers a break. This approach is highly effective, especially when you require a temporary policy.

Bundling your GLI or commercial auto with a solid commercial umbrella policy can help you save. Moreover, bundling your existing workers’ compensation coverage with a commercial umbrella policy can give you peace of mind during the COVID-19 pandemic.

Most importantly, don’t take any chances. If you choose to save some money now, you may come to regret it later. So, please consider a commercial umbrella policy to hedge your risks.

Conclusion

Insurance is a necessity in today’s business world. Any business is susceptible to a lawsuit. Therefore, you need an appropriate insurance policy to protect your company.

GLI, commercial auto, and worker’s compensation are all great policies. However, your business may need additional coverage in special situations. This point is where commercial umbrella insurance can save your business from costly claims.

Commercial umbrella policies supplement existing coverages. Commercial umbrella insurance is relatively cost-effective and highly reliable. Also, you can acquire a temporary commercial umbrella policy for special projects and events.

Ultimately, the right commercial umbrella coverage depends on your business’s characteristics. Most insurers offer policies in $1 increments. As such, you can start at $1 and work your way if need be. Best of all, you can bundle commercial umbrella coverage with your existing policies. Nevertheless, shopping around can save you on your overall premiums.

Main Takeaways

·       Commercial umbrella insurance supplements existing General Liability Insurance, commercial auto, and workers’ compensation. As such, commercial umbrella policies cover claims that exceed current coverages. Companies with high-risk levels must get commercial umbrella coverage to supplement their existing coverage.

·       Commercial umbrella insurance mainly covers third-party liabilities. Therefore, business-owned property is not generally part of commercial umbrella coverage. Business Owners Policies are the ideal protection for business-owned property.

·       Insurers typically offer commercial umbrella policies in $1 increments. A standard $1 policy runs for about $450 a year or $40 a month. Nevertheless, bundling policies can help businesses save money on their existing coverages. Moreover, shopping around is a great way to find good deals from various insurers.·       Businesses can purchase commercial umbrella policies to supplement workers’ compensation claims. During the COVID-19 pandemic, possible workers’ compensation claims stemming from infections can exceed current policy coverages. Therefore, a solid commercial umbrella policy can help companies cover employee claims.

Blog Auto Commercial Umbrella Insurance: A Guide

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