In insurance, you always have high enough limits, until you don’t. As our society becomes more and more litigious, the need for higher insurance limits has been on the rise. One way to protect your business is by purchasing an Umbrella or Excess Liability Insurance policy.
There are a number of reasons to buy an Umbrella or Excess Policy.
The most obvious is to increase the amount of insurance coverage available for your business. This may be useful when trying to obtain contracts that require higher limits than those offered on your General Liability or Auto Policies.
For example, if one of your vehicles was traveling down the road and an employee dropped something and while reaching down to pick it up the vehicle drifted into the other lane and hit a vehicle head on killing all four passengers. The auto policy has a $1,000,000 limit. The families of the four passengers sue, expected damages are $6,000,000. You auto policy will take care of the first $1,000,000. your company is on the hook for the remaining $5,000,000
Another reason is if the policy limits of the underlying General Liability or Auto Policies are exhausted, an Umbrella or Excess policy can provide primary coverage. This coverage is usually subject to a retention limit or deductible.
An example of this would be that a crane collapses on job site for a contractor. The contractor's General Liability Insurance pays out for the damages and depletes the policy limits for that year. A few weeks later one of their operators strikes a fiber optics cable. The resulting damage is $200,000. The umbrella could provide primary coverage where the General Liability Policy is unable to respond.
Umbrella or Excess policies can also provide Broader Coverage than the underlying policies. There may be incidents that are excluded by the underlying policies that may be covered by the umbrella. In such a case, the Umbrella or Excess Policy will then become Primary and provide coverage.
A common example of this is that of the territory covered by the General Liability Policy vs that covered by the Umbrella Policy. The Coverage Territory for most General Liability Policies is the US, Canada, and American Territories. Coverage on an Umbrella Policy is often Worldwide.
If Umbrella Policies are used correctly, they can be a huge asset to a business and provide very high limits of protection for a relatively cheap amount.
To learn more about Umbrella and Excess Liability Policies, Click Here!