When insuring your business, you need to be able to respond in case you make mistakes that harm other people, like your clients, visitors or other third parties. To achieve that level of protection, you will at least need general liability insurance, in addition to various other liability policies. However, even multiple types of liability coverage, with high limits, may not prevent exceptional claims being made against you. In these cases, you might be wise to enroll in commercial umbrella insurance. It’s there to help you out when your normal business liability policies cannot. Let’s take a look at how it works.
Liability Insurance for Businesses
An accident could occur in your business at any time, even when you weren’t expecting it. For example, a client might enter your store, slip on a puddle of water you failed to clean up, and hurt themselves. Or, while trying to repair their property, you accidentally do more harm than good, and the item in question gets destroyed.
In either case, your negligence or accidental mistakes might cause a significant problem for the person who got hurt. They therefore might hold the business responsible for their losses. Even worse, they could decide to sue you for compensation.
Liability policies are designed to compensate those who experience harm as a result of accidents or mistakes made by the business. The policy can compensate them for their losses, and help them move on from their losses in a satisfactory way.
Furthermore, it can also prevent the business from having to pay for these losses on its own. Therefore, you can keep your operation financially sound despite having to provide this compensation.
There are many types of liability coverage that a business might need:
Bodily injury liability coverage pays when mistakes cause harm to other people (like the client who slips and falls in your store).
- Property damage liability coverage compensates others for damage done to their belongings.
- Products/completed-operations liability coverage pays when you do a job or make a product that subsequently fails and harms someone.
- Personal injury coverage applies when someone makes an allegation against your business that you committed acts like libel, slander, advertising injury or copyright infringement.
Cyber liability coverage pays when your company data gets destroyed or stolen, and therefore puts others at risk of financial losses or identity theft.
- Errors & omissions insurance is a policy that pays when your professional services or advice cause someone else a loss, and they blame you for this problem.
In many cases, you can buy each of these types of coverage as part of a commercial general liability (CGL) insurance policy. In other cases, you might have to get them separately, though they will work in conjunction with your CGL policy to provide comprehensive benefits.
However, all liability policies have their limits. They will exclude certain acts, and will only pay a maximum amount of money for any qualifying claim. For additional help in these cases, you might need an additional type of coverage called commercial umbrella insurance.
How does commercial umbrella insurance work?
A commercial umbrella policy is extra protection for businesses to use after they run out of help from their standard liability insurance.
First, these policies can pay extra money after a claim exceeds the limits of your liability coverage. So, for example, if someone sues you for $1 million in medical damages, but your bodily injury liability coverage only pays $500,000 maximum, then your policy can pay up to the first $500,000, while your umbrella coverage can pay the remaining $500,000 to equal $1 million. Many umbrella policies offer at least $1 million in coverage at their lowest limits.
Additionally, your umbrella policy might cover certain events otherwise excluded from your standard liability coverage, and it can apply to multiple liability policies in your business, including your CGL, commercial auto and related coverage. Speak to your agent about the benefits of getting covered.