You probably carry General Liability Insurance for your business. Even with this protection, you could very well face a judgment in excess of your coverage limit. If you don’t carry a Commercial Umbrella Policy, you would pay the uncovered expenses out of your pocket. In addition, a lien could be placed on your property, you could be forced to liquidate assets, and your current and future earnings could be attached. With a Commercial Umbrella Policy, you can protect your business in the event of a catastrophic claim.
A Commercial Umbrella Policy adds another layer of protection to several other policies that you carry, including General Liability, Employer’s Liability and Automobile Liability policies. For example, if you have $1 million in General Liability coverage and a covered claim is settled for $2 million, your Commercial Umbrella Policy would pick up the $1 million not covered by the General Liability policy.
It should be noted that the Commercial Umbrella Policy does NOT extend liability coverage to your Errors and Omissions or Professional Liability policies.
The main advantage of purchasing a Commercial Umbrella Policy rather than raising the limits on your existing policies is that it is much more cost effective. This is because an umbrella is considered secondary coverage, meaning that it will not take effect until the limits of your underlying policies are exhausted. In addition, you can expand your coverage limits on several policies through a single Umbrella Policy.
If you deal with high net worth individuals in your business, the Commercial Umbrella Policy is especially valuable. A wealthy individual can demand much higher sums for lost wages because of an injury, and would be entitled to much more money than a less wealthy individual.