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Insurance 101Details of Umbrella Insurance for Small BusinessesDoes Your Business Need an Umbrella?By Mindy
BillSavings.com Brief:
Protect your small business by taking out an umbrella insurance policy. Such a move can bring you striking peace of mind along with much needed protection against the unforeseen catastrophes that can hit any business.
As a small business owner, you have to withstand a variety of factors that can work against you. Taking out an insurance policy is one way to protect yourself against the many things that could happen within your store or as a result of your products or services. One of the best forms of insurance for small business owners is an umbrella insurance policy. Learn the details of an umbrella insurance policy and determine whether umbrella insurance is the right move for you. What is umbrella insurance for small businesses? Umbrella liability insurance offers businesses supplementary coverage for any unwelcome costs that result from legal dissension. This includes financial penalties from lawsuits, settlement fees, and legal fees. Umbrella liability insurance can also cover a host of other things. Possibilities include bodily injury and personal property claims that are not covered by other liability policies you may have. For example, your workers compensation or auto policy may not fully cover such claims. Case study: Why umbrella insurance for small businesses is a wise move Though you can do everything in your power to make sure you operate a smooth and productive business, there will always be factors beyond your control for which you will be held responsible. For example, say you own a brick-and-mortar store where customers come in to shop for goods. Although you have a strict policy regarding keeping your floors clean and free of debris, you can’t control for the mother whose child follows her around the store and unwittingly spills the contents of his juice bottle. Naturally, the child wouldn’t think to report such a spill to your custodial staff. The mother never saw the spill, and so exits the store with her child in tow. Then misfortune arrives, in the form of an elderly woman who walks with a cane. If that woman steps into the juice puddle, falls and breaks a hip, you will be held liable. Now assume the limit to your general liability policy is $500,000, but for one reason or another the elderly woman claims $1 million in damages. Your insurance company would pay the $500,000, but your business would be responsible for the other half. As a small business, that’s enough of a debt to force you to close your doors. However, if you had a $1 million business umbrella liability insurance policy, you would be covered for the other half of the settlement – the remaining $500,000. In addition, your business would still be able to claim the remaining $500,000 in your umbrella policy for extra liability protection. Details of coverage offered by business umbrella insurance Your basic business umbrella liability insurance policy would most commonly apply to insurance coverage limits, as discussed in the case study above. Such business umbrella policies typically cover a range between $1 million and $5 million. They are ideal for the protection of assets or for protection from lawsuits. There are two basic kinds of umbrella insurance coverage that can be purchased by small businesses. The first is coverage for any amount that exceeds the maximum coverage limits from your current policies, such as your primary business liability policy or your business auto policy. The second type of umbrella coverage is for anything not covered by your business auto or primary business liability policies. A note on umbrella insurance for home businesses If you work out of a home office, umbrella insurance would be the most beneficial to you regarding liability risk. It is not an essential way to protect your property, as property has a defined value and can therefore be adequately protected under a home insurance policy. Liability claims, on the other hand, can rise astronomically if there are a significant number of people involved in an accident that takes place in your home office. The damages could be in the millions of dollars, at which point umbrella insurance would prove extremely valuable. If you host clients within your home office, consider an umbrella insurance policy. If you tend to be the only person present in your home office, umbrella insurance may not be necessary for you. Applicable exclusions for umbrella insurance policies Note that most business umbrella insurance policies exclude a handful of liabilities. Though exclusions vary by policy, the liabilities typically excluded are professional liability, product recall coverage, pollution, employment practices liability, worker’s compensation insurance, coverage for asbestos-related claims, and war or terrorism. Lasting protection for the integrity of your business Undoubtedly, your business is something you enjoy running and have worked hard to build up to its current strength and potential. Above all, don’t risk losing your business and your years of hard work to unforeseen catastrophes. Protect against them by looking into an umbrella insurance policy for small businesses. Such policies are often reasonably priced and provide value far beyond their initial cost. 3/23/2009
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