In this lagging economy, many businesses in New Jersey and New York are constantly struggling to cut costs, and business insurance premiums are one expense that’s coming under greater scrutiny. In a recent trend, some businesses are choosing to lower the limits on their excess liability or umbrella coverage, or drop the coverage altogether. Believing they could never have a claim that would trigger the excess policy or penetrate the umbrella coverage, they’ve decided this is an expense they can do without.
That can be a risky move. A sudden catastrophic loss can hit your business at any time regardless of what the economy is doing, and the combination of the slow economy and our increasingly litigious society could be disastrous to your business if a catastrophic loss occurs. With the skyrocketing costs of lawsuits and judgments, you should think carefully about limiting or dropping any excess or umbrella coverage.
If one of your employees hits another motorist while driving a company vehicle and causes severe injury or even permanent disability to that motorist, you’re likely facing a multimillion dollar claim that would quickly exhaust the limits of your underlying policies. That can lead to costly litigation. Having an umbrella policy in place can protect your assets by providing liability limits above and beyond your other policies. And since umbrella coverage is relatively inexpensive, you can buy a lot of peace of mind at a reasonable price.
Excess Liability vs. Umbrella Liability
Although “excess liability” and “umbrella liability” are often used interchangeably, there are some important distinctions you need to be aware of.
Excess Liability provides you with additional limits of liability above your underlying business insurance policies shown in the schedule. It offers no broader protection than that provided by the underlying policy, and may in fact be even more restrictive than the underlying coverage.
Umbrella Liability not only provides excess limits of liability above your underlying business insurance policies, but may also provide protection when no underlying insurance applies. It also broadens your business insurance program to help close or eliminate gaps in coverage.
While having an umbrella policy can be a lifesaver, it’s vital to work closely with your business insurance provider to coordinate your underlying policy coverage with your umbrella coverage. Since there are no standardized umbrella or excess liability policies, understanding the forms, terms, conditions, and exclusions of any umbrella policy you purchase is crucial.
It’s also a good idea to have your umbrella coverage with the same carrier as your underlying business insurance policies, and the inception and expiration dates of your umbrella policy should mirror those of your primary policies. Taking these steps can help you avoid nasty surprises and costly litigation brought on by coverage gaps, insufficient limits, or denial of a claim.
You’ve spent a great deal of time, money and effort to build your business, and you don’t want to see it all go to waste with one unforeseen event. All the wishful thinking in the world won’t eliminate your risk of suffering a catastrophic loss. An umbrella policy can protect your assets and your profits if it happens. And that kind of peace of mind is priceless.