Commercial Umbrella Basics: Part II

Recently, we covered the basics of commercial umbrella insurance: What is it, and is it right for your business? This month, we'll get into a few more details, and look at some of the instances in which commercial umbrella insurance might apply.

What Commercial Umbrella Insurance Covers

Commercial umbrella insurance is all about extending different types of liability coverage. In this day and age, getting sued is a real risk, and we can't always predict the many ways things could go wrong during the course of day-to-day business operations. And when large settlements, sometimes in the millions of dollars are becoming more and more common, it's increasingly possible that your company could get hit with a judgment that your primary liability policy can't handle. That means that if you're held responsible and owe 2 million dollars, but your insurance policy maxes out at 1.5 million, well, you're on the hook for a whole lot of money, which you may not be able to afford without putting your business and other assets on the line.

Different Types of Liability

As a small business owner, you probably have general liability insurance, commercial auto insurance, and worker's compensation insurance. Commercial umbrella insurance can be purchased to enhance liability coverage for any of these policies, or for all three.

In addition, commercial umbrella insurance will sometimes cover costs that your primary policy may not have covered, such as legal fees. Commercial umbrella insurance also might come into play in the following situations:

• A customer or employee is severely injured on your business property.
• You get sued for libel or slander.
• An employee uses a copyrighted image or song without securing appropriate permission.
• You cause major damage to a customer's property in the course of business operations.
• A defective or damaged product injures a customer or employee.
• An employee gets into an auto accident, which injures someone else.

Things to Know Before Purchasing Commercial Umbrella Insurance

• You must have the right underlying policy: Commercial umbrella insurance cannot be purchased without having a primary policy, and it will not kick in until the limits on that policy are met.
• There are some things a commercial umbrella policy probably will not cover, including professional errors, damage to your personal or business property, and discrimination lawsuits.
• If you have to use your commercial umbrella insurance policy, it may be applied automatically, or you might need to file two separate claims.

If you work in an industry with a lot of unknown risks, commercial umbrella insurance may be right for you. Talk to your insurance agent to find out how to add this extra layer of protection to your business.