Why Get Umbrella Liability Insurance
If you own a contracting business you should explore the benefits of obtaining a Commercial Umbrella Insurance policy for your contracting business. At FarmerBrown.Com we are able to provide expert advice based on our years of experience. Below you will find a simple and comprehensive explanation of Umbrella Insurance for all types of contractors. There will also be a number of PRO TIPS gleaned from our many years of dealing with contractors. So keep reading to learn these secrets.
What Is Commercial Umbrella Insurance For Contractors?
Commercial Umbrella Insurance is specialized insurance that covers your contracting business in the case of a catastrophic loss caused by your activities. If your business is involved in a claim that exceeds the policy limits of your commercial general liability policy, your commercial auto policy, or Commercial property liability policy, having an umbrella policy can provide additional insurance coverage. Since the standard limit of most liability policies is generally $1 Million, it does not take much imagination to think up a situation where an accident can cause more than $1 million in damages.
PRO TIP: Remember attorneys fees are covered in most policies. There are 2 different kinds of coverage for attorney’s fees. They are either inside the policy or outside the policy limits. If they are inside the policy limits they are part of the policy limit. For example your policy is an “Inside Policy Limits” and the policy limit is $1 million, if you have a claim of $800,000 with attorney’s fees of $300,000, you will be on the hook for $100,000. Using the same example as above you would not be on the hook for anything if your policy treated attorney’s fees as outside the limit. Clearly a huge difference.
What Does Commercial Umbrella Liability Insurance Cover
Commercial Umbrella insurance provides an additional layer of protection by covering the costs that exceed your other liability coverage limits. In a nutshell, commercial umbrella insurance supplements your other liability coverage by taking over when your other liability coverage limits have been reached. It gives you extra coverage on top of what you have from other liability insurance such as your general liability, commercial auto liability, and other types of liability policies. An umbrella on its own will do you no good. Commercial Umbrella requires an underlying liability insurance policy because the purpose is to increase the coverage you already have.
It is important to note that there is no coverage for worker’s compensation and other items that are not covered on the underlying policies.
How Much Does Commercial Umbrella Insurance Cost
There is a large range in cost in umbrella policies and factors that influence the cost. The following are the main factors;
Number of Underlying Policies.
The more policies that your umbrella will cover drives up the cost. This is because of the increased risk of loss with more policies;
Type of Business.
The more risky the business the higher the cost. For example a steel erection company would have a much higher rate than a landscaping company. This is because there is a much greater probably of a catastrophic accident with a steel erection company then a landscaping business;
Number of Employees.
The more employees you have working increases the chances of having claims;
Amount of Revenue.
The more business you do increases the likelihood of claims no matter how careful you are;
Location of Business.
Where you are located makes a big difference. The rates for a New York roofing company that does work in the 5 Burroughs of New York can be 2 to 3 times what the same business would pay if they were located in Texas.
Commercial Umbrella Insurance Policies are sold in coverage amounts of $1 million. For riskier businesses, an umbrella may cost as much $2,500 per year and above per million dollars of coverage. Those who fall into this category tick off all of the boxes on the high-risk side of the factors listed above. On The low end of the risk spectrum, commercial umbrella insurance costs can be as little as $500 a year per million dollars of coverage.
Since there is such a large difference the high and low ends of cost, the average amount for umbrella insurance is about $1,200 a year for a $1 million policy. However, many construction businesses will pay less than that with the premium falling closer to $900 a year per $1 million in coverage.
Coverage amounts usually range between $2 and $5 million. In certain situations, larger amounts may be needed and these policies can be obtained as well.
PRO TIP: In many instances, it is cheaper to purchase a Commercial Umbrella Policy to increase coverage rather than paying to increase the limit on an underlying policy. You will have the added benefit of increased coverage over all your policies. For example a job may require you to have $2 million commercial auto coverage. Your current policy limit is $1. It maybe a better option to purchase a $1 umbrella than just increasing your commercial auto coverage.
Difference Between Excess Liability Insurance vs Umbrella Policy
Excess Liability and umbrella policies are often used interchangeably, however this actually should not be down. It is important to realize Excess Liability and Commercial Umbrella Liability while they both add additional layers of protection they do not offer the same coverage. Both Excess and Umbrella coverages extend coverage when the underlying policies limits have been reached. Keep reading to find out what makes them different.
- Excess Liability Insurance: This provides additional coverage after an underlying liability policy has reached its limit. It covers any claims that would have been covered in the underlying policy. However, it excludes any claims the underlying policy did not cover. It only extends the policy limits to that specific policy, not to any other liability policies.
- Commercial Umbrella Insurance:This is a type of excess insurance. Like excess liability insurance, it covers additional liability that exceeds your underlying policy’s limits. The difference is that it can sometimes cover claims that would not be covered by the underlying policy. It also extends coverage all of your eligible liability policies. It should also be noted that the coverage terms may differ from the underlying policy.
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