Understanding Umbrella Insurance
Like an umbrella that protects you from the rain, an umbrella insurance policy provides an extra layer of insurance coverage over your standard liability policies. It protects your assets by kicking in when your primary commercial general liability coverage is exhausted. Buying umbrella liability insurance or excess liability insurance layers is like building a tower with blocks. Each block represents a layer of protection that is triggered if the limit in the underlying policy is used up.
Unfortunately, accidents happen — and it’s not uncommon for jury awards and out-of court settlements to run into the millions of dollars. While it’s difficult to pinpoint the exact monetary consequences of the risks you and your employees take each day, are you certain your current liability insurance offers you enough protection?
If your organization is found legally responsible for injuring someone or damaging their property, without an umbrella insurance policy, anything beyond the limits of your standard commercial general liability insurance coverage will come out of your own pocket. The typical business carries between $2,000,000- $5,000,000 in primary commercial general liability limits, but with some personal injuries claims exceeding $10,000,000 in Ontario the typical limit might not be sufficient and umbrella insurance should strongly be considered.
Umbrella Insurance Considerations
When selecting a limit that is right for your organization you’ll want to consider a number of factors including:
- Do customers regularly come and go from your business on a regular basis?
- Does your profession, industry, the location of your business, the products you make or sell make you an easy target for a big settlement?
- Do other companies in your industry carry higher limits and if so why?
- What is the cost for additional umbrella insurance limits?
There is no magic formula to determine the right umbrella insurance limit for your business, but it is important to evaluate the amount of umbrella insurance your business carries on an annual basis.
Umbrella Insurance Costs
Additional umbrella insurance can be inexpensive when compared to the added coverage you gain and the cost for each million dollars of umbrella insurance coverage decreases with every million dollars of coverage purchased.