Umbrella Liability Insurance  -  A big difference between property and liability risks is that you can put a value on the property you have at risk, but there is no way to predict the amount of damages you could be required to pay as the result of a catastrophic accident. If, for example, you were found liable in a school bus accident that injured children, the damages could be in the millions of dollars.

Umbrella Liability - also known as Excess Liability Insurance—provides extra protection for catastrophic events. The primary policies are called “underlying” policies and are specifically listed, along with their limits, on the umbrella policy. Typically, the underlying policies are your primary general liability, auto liability and the employer’s liability section of your workers comp policy. The umbrella coverage starts to pay when a covered loss exhausts the primary policy’s per occurrence limit.

Most umbrella policies exclude employment practices liability, professional liability, product recall coverage, workers compensation and coverage for asbestos-related claims, pollution, war and terrorism.

HOW MUCH LIABILITY COVERAGE DO I NEED?

The amount of liability coverage a business needs depends on perceived risk. You should first consider the amount of risk inherently associated with your business. For example, a business that manufactures or distributes power tools is at a greater risk of being sued than one that distributes towels and would therefore need more liability insurance. You can usually get a good sense of lawsuits involving your type of business through your trade association. Ask your agent for help assessing your liability risk.

KEEPING PREMIUMS DOWN

As with other types of insurance, the general rule for liability insurance, from an insurer’s perspective, is that your past claims history is a good predictor of your future claims. The greater the risk of future claims, the higher the premium. Good liability risk management is critical both to keeping premiums under control and avoiding losses.

Higher deductibles are another means of lowering premiums. Make sure that in the event of a loss, you can afford to pay the deductible you select.

WHAT IS "CLAIMS MADE" COVERAGE?

There are two major forms of liability insurance policies: Occurrence and Claims Made.
 
Occurrence Policy: An occurrence policy covers a business for harm to others caused by incidents that occurred while a policy is in force, no matter when the claim is filed. For example, a person might sue a business in 2010 for an injury stemming from a fall in 1999. The policy that was in place when the incident occurred (i.e.1999) will apply, even if the company now has a policy in place with higher limits.

Claims Made Policy: A claims made policy covers the business based on the policy that is in force when the claim is made, regardless of when the incident occurred. In the above example, the limits in the policy in effect in 2010 would apply.

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