How to Protect Yourself From Maxed Out Liability Limits

You probably know it’s important for homeowners to carry umbrella liability insurance, but were you aware businesses need it, too? In fact, practically every business faces situations where it would be beneficial.

What it covers: Even if you carry other commercial policies, each policy has coverage exclusions and liability limits. Umbrella policies, typically available with $1 to $5 million in extra liability coverage, can help pay expenses resulting from exclusions or maxed-out liability limits. In the event of claims or lawsuits, it covers costs such as legal fees, court-awarded settlements, out-of-court settlements, and incidental expenses. These costs can add up quickly, meaning other commercial policies may not be sufficient.

Umbrella policies may pay expenses from personal property claims or bodily injury claims that other commercial policies (property, workers compensation, or commercial auto insurance) won’t. And it serves as supplementary coverage if liability limits of other commercial policies are maxed out. For example, a liability claim made against your general commercial policy is awarded a $5 million settlement. Your general policy’s liability limit is $2 million.

The general policy would pay $2 million, and your business would be responsible for the remaining $3 million. You could be stuck paying the difference yourself, or your umbrella coverage would kick in and pay the $3 million. Which would you prefer? If you’re a business owner without umbrella insurance, you’re missing crucial protection that could keep your business from closing. Your agent will help you find the umbrella coverage that’s best for your individual situation.