If you’re a business owner in Louisiana, you’re aware that liability insurance is a crucial component of any business’s risk management. This is especially true for Louisiana businesses due to the state’s litigious nature. For example, in Louisiana, the likelihood that a basic auto insurance claim turns into a lawsuit is twice as likely compared to the national average. That’s why it’s important to make sure your business has the right insurance coverage.
In the event of a claim when there is unintentional harm or damage caused by your business, liability insurance jumps in to cover the costs. But what if your policy limit doesn’t cover the cost of the claim? This is where commercial umbrella insurance steps in to provide an extra layer of protection.
What is Commercial Umbrella Insurance?
Commercial umbrella insurance is an extra layer on top of existing insurance policies that provides additional coverage when liability claims exceed your policy limit. Once a liability claim of a commercial insurance policy reaches its limit, the umbrella policy kicks in to provide additional coverage up to the limit of your umbrella policy.
For example, let’s say your company is sued due to a customer’s bodily injury. The lawsuit ends up being $3 million, but your general liability insurance policy has a $2 million limit. If you did not have an umbrella policy in excess of $1 million, you would be on the hook for the $1 million your general liability insurance policy doesn’t cover. This can be a major risk to your business.
What Does Commercial Umbrella Insurance Cover?
Commercial umbrella insurance covers damage to someone else’s property, personal and bodily injury, advertising injuries, lawsuits from customers or employees, settlements, and court judgments. But remember it only supplements existing policies; it doesn’t provide coverage for policies you don’t have.
It's different than excess liability insurance because excess liability insurance only provides supplemental coverage for a specific policy, whereas umbrella insurance can provide supplemental coverage for multiple policies.
Why Should You Get Commercial Umbrella Coverage Rather Than Raising Limits on Existing Policies?
It’s a good idea to get an umbrella policy rather than increasing limits on existing policies because a commercial umbrella insurance policy is able to sit on top of multiple policies, acting as a blanket safety net. This helps provide broader protection and is often more cost-effective than raising individual policy limits.
Umbrella policies can also provide broader terms than underlying policies, which can help when certain types of expenses are excluded in underlying policies. Additionally, clients and landlords will sometimes require you to carry umbrella coverage as a part of contract or lease terms.
What is Not Covered With Commercial Umbrella Insurance?
Commercial umbrella insurance typically doesn’t cover damage to your property or equipment or for policy coverages you don’t have. For example, it won’t cover damage to your vehicle if you’re involved in an accident or damage to your property in the event of a fire or flood.
How Much Does Commercial Umbrella Insurance Cost?
Commercial umbrella insurance typically costs around $50 per month for each $1 million of additional insurance coverage. Small businesses end up paying about $75 per month on average for commercial umbrella insurance.
The level of coverage you choose, the amount of risk your business operations have, and claim history are the biggest factors that determine your coverage cost. An independent insurance agency, like Lewis Mohr, can help determine the best coverage limits and insurance carrier for your business to choose.
What Type of Businesses Should Consider Commercial Umbrella Insurance?
If you think the likelihood of one of your limits being exceeded in the event of a claim is high, it’s important to consider commercial umbrella insurance. Businesses that frequently interact with customers on their property or frequently work on someone else’s property are also often good candidates for umbrella coverage.
Commercial umbrella insurance is an important policy that many businesses should consider. If you have questions about your business’s insurance policy structure or would like to inquire about commercial umbrella insurance for your business, please reach out to us. Since 1968, we’ve been helping businesses determine the best and most cost-effective insurance options. Give us a call or send us a message, we’re ready to help.
