Your Massachusetts business is your livelihood, and you want to protect it with the right levels of business insurance. However, now that the cost of materials, labor and claims have increased, are the limits on your commercial umbrella insurance policy high enough to protect you from out-of-pocket expenses? It may be worth a discussion with your McSweeney & Ricci Account Manager to ensure you have the proper amounts of protection.
You most likely have a Business Owner’s Policy (BOP) including property and liability coverage as well as Workers’ Compensation Coverage as required by Massachusetts law. But do you have a commercial umbrella policy in case a claim exceeds the limits of your existing policies? If you have commercial umbrella insurance, are the limits enough now that the costs of claims (and everything else for that matter) have increased?
What Is a Commercial Umbrella?
A commercial umbrella insurance policy adds an additional layer of liability protection above the limits of other insurance policies. For a covered loss, the underlying policy’s limit will be used first, when it is exhausted the umbrella kicks in. Without a business umbrella you risk having to pay out of pocket for claims that exceed your policy limits. These costs can include:
- Court Judgments and settlements
- Bodily Injury
- Medical Bills
- Legal Expenses
- Third-party property damage
Commercial Umbrella Insurance can provide coverage for:
- Customer Injury
- Auto Accident Liability
- Employee Injury
- Reputational Damage
- Product Liability
- Wrongful Termination Lawsuits
Some of the business insurance policies to which a commercial umbrella supplements coverage include:
- Workers’ Compensation insurance,
- Employment Practices Liability Insurance (EPLI),
- General Liability Insurance, and
- Commercial Auto Insurance.
It’s important to note that business umbrella insurance isn’t a standalone policy. Before you can purchase umbrella liability insurance, however, you need to carry a certain amount of coverage on an underlying policy.
Which Businesses Need a Commercial Umbrella?
Certain industries are at a higher risk of being sued by employees, customers, or other businesses because of the types of products or services they provide. Any business that would like additional insurance protection than what their primary insurance policies provide should purchase a commercial umbrella.
McSweeney & Ricci recommends that any business that meets the following requirements have increased liability risks and should invest in a commercial umbrella:
- Any business where you or your employees work on other people’s property,
- Any business that has a commercial property that is open to the public,
- Any business with a contractual obligation to carry business umbrella insurance,
- Any business using heavy or dangerous machinery or equipment,
- Any business is at high risk of a lawsuit. These days, this describes the majority of businesses. Only home-based sole proprietorships with no employees and no direct contact with clients are at a low risk of being sued and even then, exceptions can occur.
For example, Contractors might be asked to show proof of insurance with specified limits when working with certain clients. A general contractor remodeling a home would have workers within a client’s homes who could accidentally damage the client’s property. Any business with commercial vehicles also faces the risk of an employee causing an accident or injuring someone else or a third party’s property. These situations could potentially trigger a lawsuit with costs and judgements that exceed standard policy limits.
With inflation driving the cost of claims higher, many contracts now require businesses to have a commercial umbrella to provide higher policy limits.
Be Prepared for Costly Lawsuits with Commercial Umbrella Insurance in Massachusetts
In today’s litigious society, Massachusetts businesses of all sizes need to be prepared for the possibility that a client, employee or business associate could bring a costly lawsuit against them. Today’s judgements can reach tens of thousands of dollars and more, which can prove financially devastating for a business without adequate insurance protection. A commercial umbrella can help make up the difference when other insurance policies limits are exhausted.
For example, if you own a store and a customer is injured while shopping and sues your business for $1 million but you only carry $500,000 in liability coverage, a commercial umbrella policy could make up for the $500,000 shortfall. Without a commercial umbrella you would be out of pocket $500,000, which could bankrupt a small business. You must exhaust your underlying insurance coverage before using business umbrella coverage.
What’s the Difference Between Commercial Umbrella Insurance and Excess Liability?
A business umbrella policy is different than excess liability coverage. Excess liability insurance extends the limits on one specific liability policy, while commercial umbrella can extend the limits of several different policies, thereby providing broader more flexible coverage.
What DOESN’T a Commercial Umbrella Cover?
While commercial umbrella insurance can extend the depth of your existing coverage, there is no insurance policy that provides unlimited protection. A commercial umbrella policy will not add coverage to a professional liability policy. Commercial umbrella insurance excludes coverage for the following:
- Liability for Criminal Activity
- Property Claims: Whether Personal or Commercial Property
- Damage Done Intentionally on Your Part
- Liability You Agreed to Under Contract
How Much Does Commercial Umbrella Insurance Cost?
The cost of commercial umbrella insurance can vary depending on several factors including the state you live in, the amount of coverage, your specific risk factors such as the number of employees and number of vehicles, and your claims history.
A commercial umbrella insurance policy could add from $1 million or more in liability coverage to an existing policy. So, if a general liability policy had a $1 million per-occurrence limit, and a commercial umbrella policy had a $5 million limit, your business would have a total of $6 million in liability coverage. (2)
“Insurance companies write business umbrella insurance policies with aggregate limits…This is the maximum amount your insurance company will cover for any claims made during your policy period.” (1)
Up to $1 million in additional umbrella coverage could cost as little as $30 per month or a few hundred dollars per year. In most cases, adding a commercial umbrella is less expensive than adding additional liability coverage to each of your underlying policies. A member of our knowledgeable commercial insurance division can assist you in selecting the right amount of commercial umbrella coverage for your specific needs.
Are the Limits of My Commercial Umbrella High Enough?
When suggesting limits for your commercial umbrella your McSweeney & Ricci Risk Manager will consider several factors including any contractual requirements you may have, your company’s level of risk, whether you have a fleet of commercial vehicles, and the size and frequency of any past claims you have filed. McSweeney & Ricci will act as your risk advisor and will help ensure you have adequate coverage to protect your business assets, your employees and your customers. Our team will thoroughly assess your risk and help you determine how to properly protect your business. With the cost of claims and lawsuits skyrocketing, it only takes one catastrophic occurrence to risk your business and your livelihood.
Count on McSweeney & Ricci for Flexible & Affordable Coverage
McSweeney & Ricci Insurance has provided personal insurance services such as home insurance, car insurance, condo and renters insurance as well as business insurance services to thousands of individuals and families throughout Massachusetts and New England since 1964. We represent more top-rated insurance carriers than most agencies our size which allows us to offer flexible and affordable coverage. Our professional team gets to know your individual business needs and will customize insurance solutions to help protect and grow your business. For more information on business insurance or commercial umbrella insurance request a complimentary quote on our website, live chat with us on our website or give us a call at (844) 501-1359.