| For businesses
that desire that extra layer of protection, the
umbrella policy is available. Most often, the
umbrella policy is used to provide protection
against catastrophic losses. It provides additional
liability coverage, usually in increments of $1
million, and is written over your other liability
policies such as your Commercial General Liability
Policy, Business Auto Policy, Employers Liability
Policy, etc...
Umbrella policies are no longer used just for
businesses with significant sales or hundreds
of employees. In fact, there are many businesses
operating as sole proprietors that include an
umbrella policy in their insurance program.
And why not? Historically, the average claim
settlement amount has not been decreasing.
Example. Imagine you're operating
as a local handyman and you don't have any employees.
You have a great reputation for providing high-quality
workmanship so you have the name of your business
printed on your truck to help increase awareness
of your business. One busy day, you're in a
hurry to start a new job and you rear-end a
school bus in your truck that advertises your
business. Injuries and damages are estimated
at $1.7 million. Of course, since the name of
your business was on your truck, you and your
business are invited to the lawsuit party. You
were diligent and had $1 million liability coverage
on your business auto policy. But that policy
alone will leave you to pay the $700,000 balance.
A $1million umbrella policy could have protected
you and your business in this situation.
Tip. Since umbrella polices
provide protection once your General Liability,
Business Auto and other underlying policy limits
have been exhausted, they're usually less expensive
than increasing the limits on each underlying
policy. Ask your agent to give you an idea of
what the premium would be to add an umbrella
policy to your insurance protection program.
Once the loss occurs, the premium you would
have paid becomes irrelevant.
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