In today’s world with costs rising, it is now more important than ever to have the added layer of protection of an umbrella policy. With the nuclear verdicts that juries are awarding to claimants, the need to have higher liability limits is essential.
First let’s start with what is an umbrella policy. An umbrella policy is a flexible coverage form that is a supplemental to the standard limits of traditional liability policies. An example is if an insured has a covered claim where the losses exceed the primary policy limit, the commercial umbrella policy will kick-in and help pay the remaining settlement . The main purpose of an umbrella policy is to provide broader coverage for liability coverage for general liability, auto, and employer’s liability. There are three key benefits of an umbrella policy:
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Increases the limits of liability for all policies covered
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Acts as primary coverage in the event the underlying policy does not provide coverage for it
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Covers multiple lines of insurance (Auto, General Liability, and Employer’s Liability)
A key benefit of having a higher limit of liability is the reduced chance of having to pay for a claim out-of-pocket. With the cost of insurance claims rising we have seen more and more claims exhaust the primary limit and make it a necessity to have an umbrella. Umbrella policy limits start at $1,000,000 and can be written for limits well in excess of that based on your risk and budget. Additionally, umbrella coverage can provide coverage for defense expenses in the event of litigation so that the insured will not have to pay for out-of-pocket expenses to hire an attorney.
Another key factor of an umbrella policy is that it has the ability to act as primary insurance in the event the underlying policy does not provide coverage. An example could be your underlying policy has exclusions for claims arising out of false arrest, libel, or slander. However, if the umbrella provides coverage for those types of risk, in the event of a claim the umbrella could drop down and act as primary insurance to help pay and defend the claim.
Lastly, it is important for businesses to have the umbrella policy provide coverage over multiple types of liability insurance so they can be as protected as possible. This can be very important for auto liability insurance . Especially for businesses that have large fleets that are constantly on-the-road driving. In the event of a catastrophic accident the umbrella becomes an extremely important coverage . In addition to that, having an umbrella policy helps provided the insured with peace of mind knowing that there is added resources and protection to help navigate throughout tough claims situations.
Prices of an umbrella policy can change drastically, based on the the type of work for each business. However, the additional premium is worth it. All it takes is one severe claim and, if there is not sufficient coverage in place, the insured could be put out-of-business from having to pay out-of-pocket.
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About the Author:
John Shortino joined Rue Insurance in 2023 and is a licensed Property, Casualty, Life, and Health insurance broker in New Jersey and Pennsylvania. John’s goal is to have the best understanding possible of his clients businesses to be able to fully understand the risk and help properly insure it. In addition to the licenses he holds, John also has two Bachelor’s Degrees in Marketing and Sports management from Kutztown University.
