Insuring your business can be a time-consuming, and complex process. With so many different types of insurance available – plus stipulations and legal jargon involved – it’s a topic that can be difficult to get your head around as a business owner. So it’s important to know exactly what cover you need, but we can’t always trust insurance providers to not oversell us policies. That’s why we’re taking a closer look at a lesser known type of business insurance today: umbrella insurance.
It’s likely you know what general liability and commercial auto insurance is – but umbrella insurance? It might have just gone over your head.
So let’s look at this type of business insurance. What is it? Who needs it? Is it worth getting? You’ll find all the answers here.
What is umbrella insurance?
Let’s answer the number one question: what is umbrella insurance?
Umbrella insurance like the one at biBERK is a type of insurance coverage that acts as an extension policy on top of an existing insurance policy. It effectively extends the coverage of whatever policy someone already has – offering more protection in the event of a claim.
When you take an insurance policy out, a legally-binding contract is signed that provides a certain amount of support in the event of an accident or incident at your company. This amount has a maximum limit, but of course, it’s impossible to accurately predict how much financial support you might need in a claim. As a result, sometimes businesses aren’t fully protected if they do need to make a claim.
This is where umbrella insurance comes into play.
It can be used to pad out existing policies so that businesses can guarantee that they’ll be able to access the support they need if something happens, and a claim has to be made. Having to make a claim is stressful enough without finding out that you don’t actually have enough coverage to support your business. With umbrella insurance in your package, you know you won’t have any nasty surprises along the way.
Because it’s such a versatile insurance policy, it’s often used as a part of business insurance packages, which contain multiple types of insurance coverage in them. This makes it easier for busy business owners who want to take the pain out of having numerous different policies with different providers and know their business is well protected.
Who needs umbrella insurance?
The fact that umbrella insurance is used to expand the coverage of other insurance policies also means you wouldn’t usually purchase an umbrella policy without having existing coverage already – whether that’s professional liability insurance or building insurance.
So providing you already have insurance coverage, any business can take out an umbrella policy, and any business might end up needing one too. While it might seem like this type of insurance is an optional add-on, there are a lot of situations where umbrella insurance would be absolutely vital in being able to access the support you need for your claim.
Scenarios where you might need umbrella insurance:
- If a lawsuit is taking longer than expected and your legal fees go up, past your original insurance coverage.
- A natural disaster has damaged your warehouse and the repairs needed cost more than what your building’s insurance covers.
- Your headquarters is robbed and the damages that were sustained to your offices require more repairs than originally covered in your policy.
- You need to make a claim for a reason that isn’t covered by your current liability policy.
As you can see from the examples we’ve covered, any business can find themselves in a position where they need extra coverage, which umbrella insurance provides. It’s impossible to predict what the costs of a claim will be, especially when the cause of a claim is an external factor. Better to be safe than sorry, right?
Is umbrella insurance worth it?
This is perhaps the most asked question when it comes to insurance – do we really need it if there’s such a small probability of making a claim? The answer lies in the level of risk that your business faces.
This will be different from business to business, depending on a number of factors, including:
Some industries incur a higher level of risk than others, such as financial companies and construction businesses where there’s a considerable risk level in their everyday activities.
- Business size
This is simple math. The more people, assets or stores you have in your business, your chances of something happening goes up – making umbrella insurance a more attractive prospect. Also means that you have more to protect too.
If your business is located or headquartered in a region prone to natural disasters or extreme weather, then it’s more important to have sufficient insurance coverage. And due to the unpredictability of weather, you’ll never know how much damage your business will sustain until after the storm, hurricane or flood.
- Financial resources
If you’re a large corporation who has access to funds, then umbrella insurance might not be necessary for you. If you did find you needed more finances to fund a lawsuit or repairs after an accident, then you could access them from within the business. On the other hand, small businesses without this financial failsafe would view umbrella insurance as an absolute essential.
Umbrella insurance: an extra layer of protection for your business
Although the reality of insurance is that you pay money to most likely not need it, it’s a business necessity that you can’t get away from. Risk is an inevitable aspect of running a business – making insurance an essential cost too. However, the cost of insurance versus the cost of having to foot the bill for repairs and lawsuits makes insurance the much more cost-effective option. And when you choose an umbrella policy, you’ll get the ultimate peace of mind knowing that if anything does happen, your business is well protected.