Is my Commercial Umbrella Limit Enough?

Tuesday, February 21, 2017  |  Trent Hess CIC,CRM, Business Risk Manager
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Is my Umbrella Limit Enough?

This is a question that we get asked fairly regularly, but unfortunately it doesn’t have an easy answer. If you aren’t aware, an Umbrella policy is an insurance policy that provides an additional layer of Liability protection over your existing Personal or Business Insurance policies. This article is geared towards the business community, but the same concepts certainly apply to your Personal Umbrella as well.
First of all, we can never know how much is “enough.” You can purchase a $10 million Umbrella, but if one of your business vehicles causes a catastrophic vehicle accident we don’t know if this would be enough. The decision comes down to your personal risk tolerance, and which premium amount fits into your budget. What we can do is provide a few rules of thumb that can help to guide you:

 1.) How severe are the risks that your business face? Keep in mind that we are thinking of liability risks, not employee injuries. Employee injuries are paid by your Workers Comp carrier. For many businesses, the most significant risks come from their fleet, especially when heavy trucks or tractors are involved. We all know that it takes just a split-second for an accident with life changing consequences to occur. After vehicles, the next consideration is the Bodily Injury or Property Damage that could be caused by your product, operations or services. Could your product cause someone to die? Could your operations spark a fire that might destroy a costly structure? As unpleasant as it is, you need to consider the worst-case scenarios.

 2.) What assets does your business have? In general, the more physical assets you have, the higher your Umbrella limit should be. This can include real estate, vehicles, equipment, inventory, etc.

 3.) What is the premium for higher Umbrella limits? Sometimes the incremental cost for greater limits simply isn’t much. If another $1 million of protection is only $500, it may be foolish not to increase even if your business isn’t high-risk. The reverse can be true as well. The incremental cost for more protection on a high-risk business may be tough to justify.

 4.) When were your limits last increased? As simple as it is, this can be a reasonable consideration. When you first purchased a $1 million Umbrella 10 years ago it was probably an adequate limit, but as your business grows, inflation happens, and lawsuit values increase it may no longer be sufficient.

Ultimately the Umbrella limit is up to you. Our role is to give you unbiased guidance and help you make a reasonable decision that makes sense for your business.

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Read 2968 times Last modified on Monday, 27 February 2017 17:50

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