A Safety Net for Your Safety Net

Commercial Umbrella Liability Insurance

By Tom Svrcek / Published September 2023

Editor’s Note: This is part two of several articles that will cover different aspects of insurance. The types of insurance covered in part two are commercial umbrella liability insurance and business personal property and contents insurance.

     In future issues, commercial inland marine insurance, commercial auto policy, garage keepers’ insurance, workers’ compensation policy, contractors’ pollution liability policy, certificates of insurance, janitorial service bonds, and license and permit bonds will be covered.

Commercial Umbrella Liability Insurance

     Commercial umbrella insurance offers extra liability coverage for the most expensive lawsuits. For example, if a covered lawsuit maxes out your general liability insurance policy but you still owe money for damages, commercial umbrella coverage can provide additional funds to make up the difference. 

     Specifically, umbrella liability insurance can supplement the coverage offered by general liability insurance, employer’s liability insurance (workers’ compensation), and commercial auto liability insurance.

     An insurer might also require you to carry a specified minimum policy limit on these small business insurance policies before offering you a commercial umbrella policy. Usually you may need a general liability insurance policy with a $1 million limit before you can buy umbrella liability insurance.

     Think of commercial umbrella insurance as a safety net for your safety net. Your other liability policies are your first line of defense. But when you need more protection, your business umbrella insurance can pick up the slack.

     Here’s how it works. Say you have a general liability insurance policy with a $1 million limit, which means it can pay up to $1 million toward your legal expenses.

     Now let’s say someone trips and falls at your jobsite. It’s a drawn-out legal battle, and between lawyers’ bills and damages, you owe $1.5 million. That means that after hitting your general liability policy limit, you still have a $500,000 bill. What happens then? This is where commercial umbrella insurance can help. It can pay for expenses that exceed your underlying policy’s limit. So for the case above, a commercial umbrella liability policy can cover the additional $500,000.

     Basically, you can make a claim on a commercial umbrella insurance policy when your business is sued over customer injuries or customer property damage, and the cost of the lawsuit is more than the limit of the underlying insurance policy designed to cover it.

     Commercial umbrella insurance can be a cost-effective way to add an extra layer of protection to your business. It is usually purchased in $1 million increments. The premium for the commercial umbrella insurance will vary depending on the size, location, and risk of your business.

     Commercial umbrella insurance used to be a policy that only big businesses bought. These days, more small businesses invest in commercial umbrellas. You might consider it if…

     You need more protection and are on a budget. Increasing the limits of your general liability policy often costs more than getting a commercial umbrella.

     You want to sign a big client who requires more liability insurance. An umbrella policy can often satisfy their requirements.

     You have lots of contact with the public. The more foot traffic a business has, the greater its liability risks are.

     You worry about the exclusions in your other liability policies. Some umbrella insurance covers claims that other small business liability policies exclude.

     As you compare umbrella insurance quotes and begin considering your options, keep this in mind. You cannot buy umbrella insurance without having at least a general liability insurance policy, and umbrella insurance comes in $1 million increments. Small-business owners can increase their lawsuit protection in $1 million increments through commercial umbrella insurance.

Business Personal Property and Contents Insurance

     For the most part, the power wash contractors have a mobile operation. However, there are times they may own or rent/lease a space for an office or for storage of supplies. Commercial property insurance helps you recover when certain disasters jeopardize your business assets and real estate. Covered events might include fire, windstorms, theft, or vandalism. You can use the payout from your commercial property policy to repair or replace items, such as buildings, computers, furniture, inventory, or equipment. Many commercial insurance policies also include business interruption insurance. This policy covers up to twelve months of lost income when certain events force you to put your business operations on hold. You may insure those items for replacement cost or for actual cash value (ACV).

     Replacement cost refers to the amount it takes to replace damaged or destroyed property with new. Actual cash value is the replacement cost of property, less the accumulated depreciation for age and wear. Typical exclusions include damages from flood, earth movement, war, terrorism, nuclear disaster, wear and tear, and insects and vermin. It pays to seek the advice of an insurance professional to help you identify your special needs.

     Property coverage is not for your mobile power wash equipment. Property coverage is for your business personal property that is kept at the location listed on your policy.

     For more information, call Joseph D. Walters at 1-800-878-3808 or visit www.josephdwalters.com.