Business Umbrella Insurance

business Umbrella Insurance

What’s The Difference Between Umbrella Insurance And General Liability?

If you are a small business owner, it’s crucial to obtain the right insurance policies that protects your bottom line. You may be confused about two basic kinds of coverage: general liability insurance and umbrella insurance.

If you are unsure about what these products will do for your business, read on for a comprehensive breakdown of both types.

What is general liability insurance?

General liability insurance is a basic kind of coverage that protects your business against claims of bodily injury or property damage. Every small business, including those you operate from your home, should carry this kind of coverage. There are three key ways this kind of coverage will protect you:

1. Products liability–this kicks in when you manufacture, distribute, or sell a product. If any of your products are defective and cause harm to other people, this coverage will help pay your legal fees and settlements in the event of a lawsuit.
2. Premises liability–this kicks in when you occupy, own, or rent a place of business. If someone slips and falls while in your store, this coverage will pay legal fees, medical costs, and settlements.
3. Completed operations liability–this coverage is essential for contractors. It protects the work you have done on a building even after the work has been completed. So if you have recently built a walkway and it collapses, this coverage will pay the damages and any lawsuits that arise.

General liability provides the first line of defense from claims arising out of your operations and premise liability. It can help protect your business and save your bottom line in the event of an accident.

What is umbrella insurance?

Umbrella insurance is a kind of coverage that sits on top of your existing liability coverage. This includes your general liability, your auto liability and your employers liability policies.  When that policy’s aggregate or per occurrence limit has been reached, the umbrella kicks in and pays any remaining costs up to the policy limit.

All businesses should carry this kind of coverage, but most small business owners try to get by without it, hoping a disaster will never hit their companies. Unfortunately, accidents do happen, and an umbrella policy can stand between your business and bankruptcy.

What kind of coverage do I need?

Ideally, you should have both. A general liability policy will provide the first line of coverage for any liability from your operations, products and premises. A comprehensive umbrella policy provides additional protection for not only your general liability, but also your auto and employers liability when large claims occur.

For example, consider a bad accident caused by one of your employees in a company car. The settlement from that kind of lawsuit can reach in the tens of millions of dollars. Umbrella coverage will kick in when your liability limit is reached, paying the remaining bills and keeping your company solvent.

What does Umbrella insurance really buy for me?

Already have pretty good coverage on auto (multiple cars), and home (one). Do not own commercial property/business, etc.
Under what scenario does umbrella coverage really kick in, and in the relatively straightforward case such as mine, it is worth it?

Consider this scenario. You cause an accident which puts someone out of work for the rest of their life and causes very high medical bills. The courts can take everything except one car, basic household furnishings, the value of your house over $150,000 (which means if your house is valued higher you might have to sell), and up to 30% of your wages for the rest of your life.

Do the math. Figure the amount of your assets and estimate 30% of your future earnings. That is what is at risk. Now figure if the premium for an unbrella is worth it.