The label “umbrella insurance” is a good description of a wide-ranging type of insurance coverage that is used to protect your company from liabilities that could threaten its financial steadiness. Commercial Umbrella insurance extends over other underlying policies to provide added coverage when certain forms of underlying policies have reached their limits. It can also kick in to fill in holes that other policies will not cover. Thus, it’s considered an umbrella policy that provides and adds an additional layer of protection.
It’s this “layering” that makes it particularly significant for company owners: It can give you access to greater limits of security from risks, at a budget-friendly rate.
Increased Financial Protection
Even when your company is currently covered under a General Liability Insurance policy, you may possibly face a legal action or settlement—or a costly repair—that goes beyond your coverage limit under that policy you currently have.
As an example, let’s say you have $1 million in General Liability but are required to pay out $2 million for a decision caused by an accident that happened at your company. If you had a $1 million Umbrella policy, it would cover what your General Liability didn’t cover—saving you from needing to pay those funds out-of-pocket or possibly selling off assets to deal with the difference.
Can Provide Additional Protection
Many commercial umbrella policies may also provide coverage for losses that are not covered under an underlying policy. For example, some coverages excluded in a commercial general liability policy are picked up by the umbrella when it’s coverage drops down to provide first-dollar coverage for risks like non-owned watercraft, aircraft liability, and advertising liability. There would, however, be a deductible that must be met before the commercial umbrella policy would pay.
Very Affordable Coverage
Since the coverage in your underlying policies must be exhausted before the commercial umbrella kicks in, the rates for commercial umbrella insurance are relatively low. Depending on the industry you operate in, a $10 million commercial umbrella will always be cheaper than the rates for a $1 million general liability policy that must pay after a lower deductible has been met.
Many Customers will Require Additional Limits
Once your business grows large enough to compete in larger markets like large corporations and government entities, you will find that these large customers are unlikely to allow you to bid without at least $5 million in liability coverage. In fact, most will not allow you to pull a truck on their property without $5 million or more of liability coverage. The good news is the cost for this additional liability coverage is not out of reach for mid-size contractors looking to fish in the larger ponds.
The Bottom Line
Most business owners have poured a lot of money, resources, and time into growing their business to a level that generates significant profits. Why put all of that at risk when you can transfer the financial risk to a highly-rated insurance company at a very affordable price. It only takes one legal action to cause financial devastation in your operation. Why take that risk?
Here is What We Recommend
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.
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