Advice for Business Umbrella Insurance

Many of us arrive at the need to purchase a business umbrella policy when one of two things happen: First, is when a customer requires it. The other, is when we realize that we’re not operating that same small business any longer. Perhaps you have a fleet of trucks now or have far more employees than when the doors first opened – and you wonder if your current insurance is appropriate. Either way, this is a good time to consider business umbrella insurance.

What is business umbrella insurance? Essentially, it is a liability policy that provides an additional limit of coverage over your other liability policies. The additional limit an umbrella policy provides customarily begins at $1,000,000. Here’s how the umbrella policy works – Let’s say one of our drivers is negligent for a bad accident in one of the work trucks. The trucks have a $1,000,000 liability limit. Let’s also assume that you have a $1,000,000 umbrella policy. The business umbrella insurance policy would sit on top of the vehicles, providing you with $2,000,000 in total liability coverage.

Business umbrella insurance policies can also sit over your general liability insurance, workers’ compensation, and sometimes event your professional liability. It’s actually very functional coverage to have as a tool.

Let’s get back to why we need business umbrella insurance. If it’s due to a customer, do not be surprised if they ask for a $5M or $10M umbrella. However, if the nature of the work that you are performing for that customer doesn’t have much risk (ie; you are a consultant that isn’t designing a critical product or process, or your company delivers break room supplies, etc), ask the client if you could get away with a reduced umbrella limit. Most times, the customer will give you a break – saving you the expense.

If you are considering a business umbrella insurance policy because your business has grown, choosing the limit has a few extra steps. First, bring in an insurance agent that truly focuses on your industry. They will know what your peers carry for their umbrella coverage. Once armed with this info, you can develop a “bracket” – what could be considered a low limit, versus a high limit. Next, balance your company’s exposure to risk within this bracket. A few points to consider could be the type of work you are doing, the value of your work, who is doing the work for you, and who your clients are. From my perspective, as long as the limit you choose is justifiably within the “norm”, you should be all set. –Scott Sutter, President, Strategic Risk Transfers