The modern business world is taking on more risks than before. No matter if you own a tiny local business or a growing business with multiple employees, one big lawsuit could be a financial disaster. Attorney fees, medical bills and settlement expenses can increase quickly and it’s not unusual for one claim to be more than the limits of your standard liability insurance.
This is exactly the reason Commercial Umbrella Insurance exists. It’s designed to safeguard your business from unexpected events and circumstances that nobody anticipates, however every business needs to be prepared for.
At Keen Coverage, we work with entrepreneurs who want to protect their business without spending. Commercial umbrella insurance is among the most efficient and cost-effective methods to achieve this.
What Exactly Is Commercial Umbrella Insurance?
Consider the commercial umbrella policy as an additional protection layer. It’s not meant to replace your general, commercial auto, or employer’s liability insurance. It only expands these policies when the amount of a claim is greater than the limits of your primary policy.
Here’s an easy example:
When your standard liability insurance will cover the amount of $1 million, and you’re hit by a $1.6 million lawsuit. Your umbrella policy could be used to cover the rest of $600,000.
Without this protection the amount would be taken directly from your business funds. For many small and mid-sized companies, this type of cost can be devastating.
Why Catastrophic Lawsuits Are Becoming More Common
The majority of business owners don’t think they’ll have to be liable for a lawsuit that is in the six or seven figures. However, in the past few years, high-value lawsuits are becoming more frequent. A variety of factors have contributed to this trend:
1. Legal and medical expenses keep increasing.
Health care expenses, long-term treatments and attorney’s charges continue to increase that naturally raises the amount of claims.
2. Jury awards are growing.
The courts often award greater settlements to the injured particularly when a business is involved.
3. Safety concerns for employees and customers are rising.
Auto accidents, slip and falls, property damage, as well as accidents at work are some of the most costly lawsuits that businesses have to face.
4. Social inflation influences claims across the board.
This is referring to the larger legal and social trends which cause the cost of claims to increase faster than inflation in general.
For companies with only limited liability insurance, one major claim could impact payroll, expansion plans or cash flow or compromise the entire business.
How Commercial Umbrella Insurance Actually Helps
Commercial umbrella insurance is created specifically for scenarios that could be catastrophic. This is how it will protect your company in the event of a claim that is more than you expected.
1. It Extends Your Existing Liability Coverage
Your primary insurance policies will only cover you to a certain limit. Once the limits have been reached, you’re responsible for the rest, unless you have umbrella coverage.
Umbrella insurance is the additional level of security typically in increments of $1 million. This additional cushion ensures you’re not obligated to cover huge sums out of pocket in the event of a major claim.
2. It Covers the Types of Claims Most Likely to Go Over Your Limits
Certain liability claims can escalate rapidly, particularly:
- Commercial auto accidents that cause multiple injuries
- In serious slip-and fall accidents involving customers
- Damage to property resulted from employees off-site
- Major injury claims at the construction sites or on service facilities
- Lawsuits that require long-term disability or medical benefits
Umbrella insurance steps in exactly when these high-cost situations arise.
3. It Supports Long-Term Business Stability
As your business expands, the risks increase with it. More employees as well as more vehicles, greater interactions with customers, more locations.
The umbrella insurance will ensure that your protection from liability increases with the growth of your business. It enhances your risk management strategy and gives your financial stability for the long term when your business expands.
4. It Protects Your Assets and Cash Flow
A devastating lawsuit could cause disruption to day-to-day business activities. In the absence of umbrella insurance, businesses are often faced with:
- Cash for emergencies
- Drained savings
- Planned expansions delayed
- Contract losses
- Damage of reputation
- Shut down in extreme cases
The umbrella insurance policy helps your company stay out of financial calamities by securing costs that primary insurance won’t cover.
5. It’s Surprisingly Affordable
One of the major benefits that umbrella insurance offers is the cost. Since it is only available once your primary limits have been exhausted, premiums tend to be far more affordable than increasing every individual policy.
It’s among the most valuable security options a company could invest in.
Which Businesses Should Consider Umbrella Insurance?
Although any business can profit from umbrella insurance, it is crucial if you:
- Deal with customers on-site
- Use company vehicles
- Have employees or contractors who work off-site
- Handle heavy equipment
- Own valuable assets of your business
- Face High public exposure or constant customer flow
Industries such as construction, retail transport, hospitality, and service industries typically see the most benefit.
Final Thoughts
No company plans for a catastrophic lawsuit, but it’s just one event to expose your entire business at risk. Commercial umbrella Insurance is an additional layer of security that could make it the distinction between manageable loss and financial catastrophe.
At Keen Coverage, we help companies choose the appropriate limits for umbrella insurance, according to their specific needs and risks as well as their long-term goals. With the right security in place, you’ll be able concentrate on growing and running your business without worrying about unexpected events.