Most businesses have several different insurance policies in place to protect themselves, from General Liability to Workers Compensation to Business Auto Insurance, to name a few.
What happens in the event a claim quickly exhausts, or spends, the coverage limit on an insurance policy? What happens next? For example, a company vehicle causes an accident that severely injures multiple victims, and the $1,000,000 limit on the auto policy is just not enough. Or, a product ships out with unknown problems and customers are injured, and the liability limits are quickly absorbed by lawsuits.
If the business has a commercial umbrella policy, once the limits on a primary policy are exhausted, the umbrella kicks in, covering the remainder of the claim, up to the umbrella policy limits. These start at $1 Million and increase in $1 million increments, to 3, 5, 10 and higher limits. If the business does not have a commercial umbrella policy, and the primary (known as “underlying”) policy is exhausted, the business itself is on the hook for the remainder of the claim, including defense costs, exposing the business to potential bankruptcy.
The commercial umbrella is the last line of defense for a business during a very severe & large claim. The standard limits in most policies will cover the majority of claims a business may face, but even standard policies can be inadequate in severe situations. Insurance is about when really bad things happen unexpectedly.
It is important that the business works with risk or insurance professionals to meet integration requirements between underlying and umbrella policies The underlying policies must have certain minimum limits of coverage in place in order to have the proper transition, without gaps, to ensure a cohesive and integrated program.
In addition, umbrellas come in different flavors, including form-following, or excess over specific policies only, topics broader and deeper than can be covered here.Umbrella coverage provides tremendous value to a business, and may be the insurance backstop to keep the business alive after a bad claim. Speak with us today about your commercial umbrella needs