A commercial Umbrella policy is a contract that provides coverages for liability losses above and beyond limits paid by certain underlining liability policies provided by the business.  The policy goes in effect when the other underlining liability policies stop. The named insured in the Umbrella policy is accountable for keeping in force certain scheduled underlining policies.  Any changes in the status, terms, and conditions of the underlining policies must be reported to the insurer providing the Umbrella insurance.

Limits of Umbrella Coverage: The Umbrella policy comes with limits of $1, $2, $3, $4, and $5 millions.  Many companies may not offer more than $5 millions. However, some companies may offer higher underlining limit amounts.

Difference Between Excess Liability and Umbrella: Although used interchangeably insurance experts believe that there is a big difference between Excess liability policies and Umbrella policies. In most cases policies  labeled 'Excess Liability Insurance' offer extension of coverages only while Umbrella policies will fill some gaps by providing coverages for losses that are not covered by the underlining policies.

SIR: Self Insured Retention, is the amount of which the insured has to pay before the Umbrella policy kicks in for certain losses that are not covered under any underlining policy. For example, if your SIR is $10,000 then your Umbrella policy will pay for certain liability losses that are not covered under the underlining policies, above and beyond the $10,000. SIR can be waived by endorsement but at additional premiums.

Umbrella Underlining Policies

  • Commercial General Liability. The types, forms, and limits of coverage are important factors that distinguish one policy from another.
  • Commercial Auto Liability Types and Limits. Besides the limits of coverage, special attention is to be paid to characteristics of drivers, their ages and driving record history. Also, type of trucks and radius of operations, FHWA filing requirements can become very important in determining the rates.
  • Commercially Owned Watercraft. The forms and limits of the watercraft policy along with people involved in operating the watercraft.
  • Workers Compensation and Employers Liability. Limits of liability and state  exposure are important factors that will affect the rate of Umbrella policy.
  • Professional Liability Forms, Types, and Limits
  • Liquor Liability Limits
Factors Affecting Rates and Issuing Umbrella Insurance

Description of Operations:  Umbrella insurance rates vary based on several factors, first of which is description of operations. No two Umbrella policies have the same price, because different businesses have different risk exposures. Other factors lead to increased risk, hence premiums, of the Umbrella insurance. These factors include exposures to habitation, exposure to swimming pools, athletic and sport facilities, as well as exposure to consumption of liquor and live entertainment.

If there is habitation exposure, a complete description of that exposure becomes important such as the number of units;  construction type, age and number of stories of the building; nature and rates of occupancy, etc.

In situations where liquor is consumed, insurance companies normally worry about the size of operation, live entertainment offered, safety and security provided. Offering and sponsoring sport activities such as swimming or gymnastics may mandate that the business furnishes to the insurance companies facts about the nature of facilities/ activities, safety measures, and other risk management measures.

Finding an Umbrella policy can be an easy task. Contacting an independent insurance agent is a good start. Independent insurance agents have access to many insurers and can provide more quality quotes at competitive rates.

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