Business Umbrella Insurance: Is it Right for You?

Business umbrella insurance is insurance coverage that provides additional protection for your business in issues of liability. Umbrella insurance provides you with protection against lawsuits that could result in punitive damages, and often extends insurance to cover liability of employees and others who act on your behalf.

Umbrella insurance is a good investment if your business has contact with the public in any way, through customers visiting your store, employed or contracted sales people visiting customers or clients, or products that you sell or manufacture being accessed by customers.

Umbrella insurance can protect you in many different ways. Once your business liability is exhausted, umbrella insurance can cover the costs and expenses you would be responsible for.

  • Increased liability limits. Depending on the liability limits of your regular coverage, certain contractors (i.e., government contracts or major corporate contracts) may require you to have higher liability limits than you currently have, making an umbrella policy a necessity.
  • Defense costs. Even if you are not at fault, if you are sued, you will have to defend yourself in court. Certain umbrella policies provide limited or unlimited defense protection.
  • Your standard business insurance will protect the officers of the company, but if you are in an industry in which you need to insure all of your employees, contractors, and other business partners for any liability they might assume on your behalf, an umbrella insurance policy can expand your coverage to include these additional actors.
  • Mental injury allegations. If you are sued, it is typically for physical damage to property or person. More and more, however, the courts are handling cases in which mental damages are requested, which may not be covered by your standard policy. An umbrella policy can protect you from personal liability in these types of lawsuits.
  • Unique coverages. Often, anything that falls outside the scope of standard business insurance can be specified and covered within the scope of an umbrella policy.

Other coverages you might consider through the purchase of an umbrella policy are increased coverages for automobiles. Standard auto insurance may not be sufficient if you provide passenger oriented services on a tour bus, limousine, taxi cab, or charter bus. An umbrella policy can increase your coverage limits and protect you from liability claims that exceed your regular insurance amount.

Determining whether or not you need an umbrella policy often comes down to assessing the risk your business faces. If you have a very small business with few employees and little contact with the public, you may have less risk than a larger company with several employees and products that are manufactured and sold to the public.

When shopping for an umbrella policy, be sure to shop around and compare prices and coverage levels. Don't assume that the person providing your standard business policy will ultimately have the best price and selection for umbrella coverage. Certain companies may specialize in these types of specialized coverages and may be able to offer more competitive pricing.