Umbrella liability insurance covers the small business for issues outside the coverage and protection of general liability insurance. Umbrella policies protect the future income and assets of the insured, and are meant to be a supplemental policy to be used in conjunction with the primary business insurance policies.
It is different from excess insurance because excess policies do not take effect until all other coverage is completely tapped out. The umbrella policy is used to fill gaps in coverage and does not require exhaustion of primary policies in order to take effect. Because of this differentiation, an umbrella policy has the potential to become a primary policy «on the risk» in certain situations.
The word «umbrella» is representative of the broad coverage of the policy, in comparison to a large umbrella shielding its owner from a rainstorm, as well as its use as a «rainy day» policy. It may also provide coverage for things that may have been excluded by other policies, including slander, libel, invasion of privacy, false arrest, or a number of other claims.
This type of policy is sold in million dollar increments and coverage is usually available for only a few hundred dollars each year. Small businesses are slowly discovering that they may obtain tons of extra coverage at minimal expense. Umbrella small business insurance does not apply to professional liability insurance, however, also known as errors and omissions coverage.
Extra Protection for Your Business
Even though the small business may have purchased tons of insurance in several different forms, this does not mean that business owners want to deal with the hassle of having to make claims to all these insurance policies after an accident, break-in, or disaster occurs. Here are some other ways a small business can safeguard itself against potential issues:
1. Prevention against criminal activity and disasters:
- Install fire extinguishers, motion-sensor outdoor lights, smoke detectors & deadbolts.
- Keep all office equipment away from windows and out of public view.
- Keep all important documents and valuables in a fireproof safe.
- Implement a disaster recovery plan in order to minimize losses and recover to normal operations as quickly as possible.
2. Accident prevention:
- Do not overload electrical outlets or circuits.
- Keep stairs and walkways clear of debris and ice.
- Post all safety rules and enforce them.
- Ensure all equipment is properly maintained.
3. Liability prevention:
- Be sure to make back-up copies of all important documents and keep them somewhere off the business campus.
- Do not accept work orders or assignments you are unable or unqualified to perform.
- Read all fine print before signing contracts in order to avoid assumption of other people’s liabilities. Have an attorney on hand to review all legal documents.
Insurance is a good way to cover the small business in the event that any disaster strikes but it is the responsibility of the business owner to ensure that all necessary precautions are taken to prevent the necessity of insurance claims before an incident ever occurs. Just do everything in your power as a business owner to ensure the safety of you, your employees, and your customers, as well as, your business’s assets.