Umbrella Insurance - When Extra Coverage Is Prudent

An umbrella insurance policy may be that extra coverage you need to fully insure yourself and your business. You may think that you have all the liability insurance that you could possibly need, but you may be underestimating the potential for losses.

Remember that your potential for loss doesn't stop at damages or at the cost of reparations and restitution. Over the past few years, the courts have awarded incredibly high judgments in many cases. Million-dollar settlements are quite common, especially in cases involving loss of life, limb or health. When a person can prove that you are at fault, the cost of settling the case (in or out of court) can be very expensive. In many cases, it can mean the death of your business if you can't arrange to make the necessary restitution.

And if you think an accident can't possibly happen to you, think again! For example, you may have a one million dollar general liability policy. If there should arise a situation in which you were found liable for 1.5 million, how would you meet the half million that your insurance won't cover?

An umbrella insurance policy could be the answer. In general terms, the "umbrella" policy is one that only comes into play when your basic insurance policies have met maximum payouts. That means that you may go for years (and you certainly hope that's the case) without having cause to use the umbrella policy. But the point is that it's there if you should ever need it.

What if you're one of the many companies with client mandated insurance requirements? If that's the case, you may still have need of an umbrella insurance policy. Those mandates simply outline the minimum insurance requirements for specific types of businesses. They don't limit the amount of liability a business can face. Even if a client requires that you carry a million dollar policy, you could easily be sued for more than that amount. An umbrella policy would kick in if that should happen.

There are some limitations to the kinds of policies you can choose to supplement with umbrella insurance. Professional liability policies are not eligible. You can, however, add an umbrella insurance policy to a general liability policy, or to an employer liability policy. Hired and non-owned auto liability policies are also eligible for an umbrella insurance supplement.

The potential for loss is great. Taking the initiative to carry an umbrella insurance policy is a prudent way to protect yourself and your business.