The most common area to see umbrella insurance for business is in the form of commercial umbrella insurance for companies. This can be a great way to protect your business assets from lawsuits and other problems that may arise in the future. But it can also be a great way for employees to protect their own personal assets. So which is best?
One way to determine if you should have umbrella insurance for business is to assess your personal financial liabilities and existing policy limits. These two factors, along with your company’s assets, will ultimately determine the insurance cost for your policy. So you have to do your homework here. Your assets, liabilities, and current insurance costs are what you will ultimately use to calculate your premiums.
If your company has a lot of non-compete clause items, then it will make sense to purchase additional liability insurance on property damage and bodily injury coverage. Typically, coverage limits on these policies are automatically increased when you purchase them, but that doesn’t mean you have to purchase them. They can also be obtained as stand-alone policies, with umbrella policies, or via multiple policy bundles.
There are three things you want to pay attention to when evaluating your liability policy options. First, what is the premium? The cost of the premium is how much you will ultimately pay on an annual basis. Also consider your investment objectives: How long will you run your business? Are you primarily seeking insurance to protect against unexpected events, such as bankruptcy or natural disasters? Or do you already have adequate coverage and need an annual increase to be able to handle new legal situations?
Once you know your assets, liabilities, and investment objectives, evaluate the cost of your existing insurance coverage. Your existing liability coverage needs to be replaced or consolidated to determine the amount of coverage you actually need to maintain operations in the event of a lawsuit. Also note that the liability coverage portion of your policy should be replaced or consolidated as part of your overall umbrella policy; otherwise, you could be paying too much for too little coverage.
The final step to purchasing umbrella insurance policy for your business is identifying the replacement costs. How much would it cost to replace your entire liability policy, including any existing restrictions? What are the costs associated with adding new employees to your organization? How many potential risks do you foresee in the future? All of these questions are important parts of your evaluation and can help you determine whether your current liability insurance policy is sufficient and needs replacement or consolidation.