Why your firm should consider umbrella insurance.
Umbrella insurance provides liability coverage over and above the coverage afforded by your basic general liability policy. If you have also purchased commercial auto liability or employer’s liability coverage, your umbrella should also apply excess of that coverage. To understand how an umbrella works try thinking of it as a building. Your basic (primary) policies are the building floor, and the umbrella is a roof with overhangs. The height of the building represents the umbrella policy limits, and the overhangs represent coverage afforded by the umbrella not covered by the basic policies. An umbrella protects your firm against potentially devastating lawsuits. Here are some things to consider before purchasing a policy:
The limits your firm needs largely depend on the nature of your business. For instance, roofers and pharmaceutical manufacturers are subject to catastrophic losses, and thus, they are likely to need higher umbrella limits than retail stores.
The umbrella should provide coverages not afforded by your basic liability policy. The coverages your company needs depend on the type of business you operate. For example, if your company engages in print or online advertising, you might want an umbrella that affords broader coverage for personal and advertising injury than your basic policy. Some umbrellas cover humiliation or discrimination unrelated to employment as part of advertising injury.
The amount and scope of coverage an umbrella can vary widely from one insurer to the other. Thus, it is essential to shop around and compare policies. An excellent place to start is to obtain an umbrella quote from the insurer that issued your basic policy.
There are a few things to keep in mind when shopping for an umbrella. First, many umbrella insurers have replaced the old “legalese” with simplified language like that found in most primary policies, making umbrellas easier to read. However, some umbrellas are so similar to the basic policy that they do not provide much broader coverage.
A second thing to consider is that an umbrella policy may contain exclusions not found in your basic policies. Alternatively, an umbrella may contain the same type of exclusion as your primary policy, but the exclusion in the umbrella may be broader. For example, the pollution exclusion in your basic liability policy may retain some pollution coverage while the exclusion in the umbrella retains no coverage at all.
Thirdly, some umbrellas contain self-insured retention or “SIR.” It represents the amount your firm will pay out of pocket for each occurrence covered by the umbrella but not the basic policy.
Finally, when buying an umbrella, make sure it begins and ends on the exact dates as your basic policies. Policy dates are essential because many umbrellas limit coverage to damages resulting from injuries or damage occurring during the policy period of the umbrella.