The Value of Having an Umbrella Policy
Setting the scene.
Imagine: one of your employees is driving to a job site, runs a red light, and hits a vehicle carrying numerous passengers. The medical bills rack up, and are at the point where they exceed 1.5 million dollars. Your underlying automotive policy would pay up to the stated limits which, if written correctly, should hopefully cover one million. Once this policy is exhausted, you as the business owner are left holding a hefty half-million dollar bill.
This one scenario can put a lot of companies completely out of business, because footing a cost that high is not realistic — especially for new and mid-sized businesses.
If business statistics are correct, up to 30 percent of new businesses fail within their first two years of operation due to money struggles. That makes having some safety nets in place — like an Umbrella Policy — even more important.
But what do umbrella policies cover?
Umbrella policies are something I recommend for every company I work with because it is going to supplement the general liability, automotive, and workers’ compensation coverage you already have.
In the scenario I previously mentioned, imagine you had an umbrella policy in place. Umbrella policies kick in on claims like these when other policies have already been exhausted, up to the excess umbrella limit.
Instead of having to pay out of pocket, your business can now survive.
An umbrella policy is specifically designed to protect your business in the event of a catastrophic claim. The value that umbrella policies hold is immeasurable, because they save businesses from large financial burdens on a regular basis.
This is only one of thousands of examples where umbrella policies can make the difference between your business shutting its doors and continuing to kill it into the next quarter.
Some points to remember when it comes to umbrella:
- You need to have valid insurance first before you can obtain an umbrella policy
- You need to have used up your regular insurance first before umbrella can kick in
- Umbrella doesn’t cover everything, it covers excess liability, which makes it more affordable than other liability insurances
Another thing to keep in mind is if you feel like there is a specific area of your business where umbrella coverage would help out the most — for example, let’s say you manage several rental properties — you will want to talk with your insurance broker (i.e. me!) to make sure that your umbrella policy covers that area.
Umbrella policies are very useful, but you need to make sure ahead of time that the policy has been tailored to your specific industry and kicks in for all the areas in which you could be susceptible to excess claims.
If you are interested in learning about more scenarios where umbrella policies can bail you out of tough situations, I can be reached by email [email protected].
~Sean