In the present-day world of large-loss settlements and high defense costs, a commercial umbrella/excess policy is critical coverage for anyone who owns a business, affording protection for catastrophic or financially crippling liability losses–which, if uninsured, could destroy an organization.
Coverage usually steps in with excess limits over and above the primary or underlying policy, including general liability, employer's liability, auto liability, and liquor and professional liability.
Commercial umbrella/excess limits is coverage that agents should be recommending to their clients as well as including an optional premium quotation along with new or renewal primary limits on general liability and professional accounts.
Consider the example of a banquet hall, which is filled to capacity and has a fire that destroys the building resulting in injury or death to patrons. The owner's general liability coverage has limits of $1 million per occurrence and $2 million aggregate.
Through investigation, it is determined that the banquet hall had numerous fire code violations and a verdict of $5 million is awarded the claimants.
Without matching umbrella/excess policy limits protection, the owner could well be driven into financial bankruptcy.
Commercial umbrella coverage typically includes defense costs outside of limits and damage awards, if any. This means the insured would be covered for any defense costs paid in addition to policy limits.
Umbrella carriers are increasingly receptive to coverage enhancements by allowing deletion of the self-insured retention, usually $10,000 to $25,000. The SIR is similar to a deductible that the insured would otherwise be obligated to pay for claims when primary coverage is unavailable at the time of a loss incident.
Seamless umbrella/excess coverage is essential when providing adequate protection limit needs.
Most commercial business classes are eligible for umbrella/excess policies, including but not limited to:
o Contracting–general contractors and subcontractors, residential trade, engineers, consultants, landscapers.
o Habitational–swimming pools with diving boards, ski resorts, apartment buildings, small commercial buildings, homeowners and condominium associations, vacant buildings and land.
o Manufacturing–biological products, boats or ship building, cosmetics, fertilizer, toys, sporting goods, playground equipment, machinery.
o Mercantile–bars, restaurants, hotels.
o Service–dealerships, day-care centers, beauticians, contractors equipment rental, car and truck rental, health clubs, banquet halls.
o Institutional–government entities, school districts.
The current purchase trend is excess limits "follow-form" coverage, with "drop down" protection in the event the primary underlying policy limit is reduced or exhausted and includes automatic additional insured protection.
Prospects include those businesses that need to comply with lease or contractual obligations for excess limits such as construction projects, special events, tenant/landlord, and work or services performed at a customer's location.
Whereas umbrella provides broader coverage than the underlying policy and unseen gap protection, there are situations when an insured may just want an increase in limits and not necessarily the additional coverage an umbrella provides.
In either scenario, whether a large or small business, the "extra" protection is needed to protect a company's assets from unexpected and devastating losses.
Another high potential loss severity situation could be the case of a food manufacturing firm. Exposure to food poisoning involving multiple claimants who sustain serious health problems or even death, may well result in financial losses in the millions of dollars to the company.
Higher limits protection is essential to avoid a potential aggregation of losses, which could bankrupt the business.
For the insured's added peace of mind, the umbrella/excess policy is a cost-efficient option. Because primary market underlying rates are lower in today's competitive conditions, so is umbrella/excess pricing.
The money the insured saves in the primary policy could be used to buy excess limits protection.
A price indication or formal premium quotation can usually be obtained very quickly from specialty markets that recognize the need for fast turnaround.
In the current litigious society, it's important for insureds to protect their hard-earned and perhaps substantial assets from a devastating lawsuit. Umbrella/excess liability coverage for operational exposures is an essential option and is available at a reasonable cost.
Can your client afford not to purchase this extra protection?
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