Getting the right business insurance in California can be a major challenge. Not only do you have to sort through various kinds of policies, but you also have to consider the terms and conditions of each. Today, we’ll have a closer look at what umbrella insurance is, whether you need it, and whether this kind of policy comes with a deductible.
Do Commercial Umbrella Insurance Policies Have a Deductible?
When you first look through your umbrella insurance policy’s documents, you might think that there is no deductible. However, there are usually underlying limits requirements and self-insured retentions, which are similar to deductibles. They are designed to protect the umbrella insurance company and reduce the amount of money they are liable for.
What Are Underlying Limits?
The term “underlying limits” refers to the amount that needs to be covered by your general liability insurance or your other primary policy before umbrella insurance kicks in. When you take out umbrella insurance, the assumption is that you already have another policy in place and you’d simply like to extend your coverage.
Most insurers have certain requirements for this. They might ask you to be covered for at least $500,000 or $1 million. If you don’t have the right kind of primary insurance, your umbrella policy might not be valid. Underlying limits are very similar to deductibles, but the primary insurance company pays them instead of the policyholder.
What Are Self-Insured Retentions?
Umbrella insurance is not only used to extend your coverage limits, but it can also fill gaps in your regular insurance. If the lawsuit filed against you isn’t covered by your primary insurance provider, your umbrella policy will pay. However, you’ll need to cover a pre-determined amount on your own before your insurance kicks in. If your policy comes with a $60,000 self-insured retention, you’ll have to pay this, and the insurers cover anything in excess.
Such self-insured retentions are almost the same as deductibles, but the amount is usually much greater. General liability, car, and property insurance policies often come with a very small deductible, but your self-insured retention might be a five-figure amount. Carefully check your policy and make sure you have the necessary amount in a safe, easily accessible bank account.
Who Can Benefit From Umbrella Insurance?
As the name suggests, umbrella insurance is designed as a broad layer of protection on top of your regular insurance. It kicks in when your other insurance policies have reached their limits, and it fills gaps that other types of insurance don’t cover. Although umbrella insurance isn’t mandatory, it’s a good idea for businesses, especially in high-risk industries.
If many people in your line of work get sued by customers or members of the public, you might be at risk. A single large jury award could put you out of business. Umbrella insurance is particularly important for companies that have a vehicle or a physical location like a shop or office. Sometimes, business partners require an umbrella policy, so you might find it more difficult to land contracts if you’re not covered.
You Want to Increase Your Coverage Limits
One of the main purposes of umbrella insurance is to extend your coverage limits. Most general liability insurance policies for small businesses cover policyholders for up to $1 million per occurrence. If someone slips and falls in your business and gets seriously injured, this amount might not cover all their medical bills, loss of work, pain and suffering, and property damage.
Umbrella insurance kicks in when your regular liability insurance policy has reached its limit, and it covers the rest of your costs up to a certain amount. This saves you from having to pay the additional funds out of pocket and therefore protects your business from financial harm.
You Want Simplicity
Buying lots of different types of business insurance in California quickly becomes complicated, especially since you’ll need to check and renew each policy annually to ensure it still suits your company’s needs. Umbrella insurance simplifies your life because it covers many risks, so you don’t need a separate policy for each potential problem.
You’re Worried About Liabilities Not Covered By Other Insurance Policies
General liability insurance protects you from the most common risks, such as personal injury or property damage, but it might not cover certain other issues. Before you take out a policy, speak to your insurance agent about what is included and what isn’t. If you believe that you’re not fully protected, look into getting an umbrella insurance policy.
Umbrella insurance addresses additional risks. If you get sued for false arrest or imprisonment, malicious prosecution, or shock and mental anguish, most umbrella policies will cover you, but your general liability might not. Similarly, you’ll be protected if someone initiates a lawsuit related to slander or libel. Slander is when you make a false verbal statement, and libel is when you make a false written statement that damages a person’s reputation.
What Is Not Covered by Umbrella Insurance?
You aren’t covered by insurance if you cause damage on purpose or act illegally, and your insurance might refuse to pay if you’ve assumed liability when signing a contract. Most umbrella insurance policies also won’t cover damage to your own property or your personal injuries.
If you’re worried about getting injured and not being able to work, accident and sickness insurance could be right for you. This helps you to pay the bills while you’re unable to work. Most business owners also take out property insurance to protect their company vehicles, buildings, equipment, and electronic gadgets.
What Other Policies Might I Need?
Businesses need to take out several insurance policies, including general liability insurance, workers’ compensation, property insurance, and umbrella insurance. While not all of these are legally required, they can prevent financial hardship and even bankruptcy. Reach out to us at ISU Armac to find out what protection your business needs. We can tell you what policies are best and whether there is a package deal available in your area.
General Liability Insurance
As discussed, you’ll need to get a general liability insurance policy before taking out umbrella insurance. This covers the most common liability issues your business might face. It is crucial for anyone who has a physical location, visits customers in their homes, advertises online, or uses social media to promote the company.
General liability insurance pays for damaged property, medical bills, a loss of income, the injured party’s pain and suffering, and your legal bills. Because lawsuits can cost hundreds of thousands or millions of dollars, this type of insurance is crucial.
Workers’ Compensation
While general liability covers lawsuits filed by customers and members of the public, it doesn’t protect you against being sued by your employees. Even if you do your best to treat your staff well and keep them safe, you might face a lawsuit if one of your workers gets injured on the job. For this reason, you need to take out workers’ compensation insurance. In many areas of the US, this is a legal requirement.
How Much Does Umbrella Insurance Cost?
Commercial umbrella insurance policies are cheaper than you might think. On average, businesses in California can expect to pay $40 per month for every $1 million of additional coverage. Your quotes depend on several factors, including your experience level, the type of company you run, and your financial background. Businesses in certain industries are more at risk, so they’ll need to pay more.
Your quotes might also be higher if you have many employees and business vehicles, since you’re more likely to run into a problem. Rural areas tend to be the cheapest to insure because there are fewer people around, and there is less traffic on the roads, which means that the chances of a lawsuit are lower.
How to Reduce the Cost of Business Insurance in California
Companies around the country are trying to reduce their costs due to inflation and the spiraling price of energy. But cutting out certain kinds of insurance might not be the best way to go because it puts your business at risk. Instead of canceling your policies, speak to your insurance agent about keeping your costs reasonable. One of the most successful strategies is to compare providers and check every policy on an annual basis.
Insurers often offer great introductory deals, but then increase their prices after the first year. To prevent high costs, negotiate with insurance companies or switch to a new provider when the price becomes too high. Your agent will negotiate with insurers to get you the best deal possible, and they’ll also make sure that you’re not paying for anything you don’t need.
Finding the right kind of business insurance in California can be complicated. Aside from your regular policies like general liability, you might need umbrella insurance, which covers additional risks and extends your coverage amount. Reach out to us at ISU Armac and ask us for quotes. We’ll go through every aspect of your situation and help you find the best policies for your small business.
