An Umbrella Policy – The ONE Insurance Small Business Owners MUST Have

RAs a business owner, you know there is a litany of insurances you need to protect yourself and your business from various mishaps. There’s home, auto, life, disability, business overhead, general liability, you get the point. We are insurance poor (business owner’s especially). However, there’s likely one insurance in particular that you may not realize you need. Most business owners tend to overlook this particular policy. Some may even dismiss it as an unnecessary expense. In spite of that, I’m going to tell you today that just isn’t true. It’s vital for your security. What insurance am I alluding to? An umbrella policy.

A good insurance broker will often recommend a basic umbrella policy. These types of policies are available both personally and professionally. I would recommend obtaining both as a business owner.

Examples of What An Umbrella Policy Covers

They cover more than just a person. Let me break that down with this analogy. Often my wife and I find ourselves going out in a rainstorm. If we have a big umbrella, we can both fit under the umbrella. And sometimes, even one of our children, like our five-year-old Jude, can get under the umbrella with us. For the most part, we will all stay dry because the umbrella protects us from the rain.

Well, the idea is essentially the same when it comes to an umbrella policy. Basically, the umbrella policy sits on top of the current policy, like an umbrella, coordinating the other policies, making them more valuable. So when you purchase one of these policies, it offers you some extra coverage. Here’s an example, I’m driving down the road. I already have auto insurance on my car. My policy covers $300k worth of damages and $500k when it comes to medical and property coverage. So what happens if I get in a wreck and hit 15 Jaguars, one Lamborghini, and a Maserati all at the same time (which could happen because anything is possible). Well, my $300k coverage on my auto insurance is probably not going to cover the damages to all those luxury vehicles. It likely won’t even cover half the repairs.

Collateral Accident Injuries

Even more importantly, what happens if I injure someone in that wreck? It could be a driver in one of the other cars or even a passenger in my own, or some combination of all. Those injured could end up in the hospital for a couple of weeks or even months, which might max out your medical coverage. That’s where your umbrella policy comes into play. It would pick up what your regular policy doesn’t cover.

Fraud

As a business owner, one of the things you can do is to have an umbrella policy that offers protection in certain situations and areas where there may be exposures in your regular policy.

High profile individuals (business owners) who are often in the news, living in affluent areas are the individuals that really need to get some coverage. They could be targeted for liability issues. Recently I saw a video on YouTube where that very thing happened. An individual jumped in front of a car in an affluent neighborhood just to get hit and try to garner money from a wealthy individual in a litigation claim.

Accidents in the Office

Many times, business owners entertain clients or associates in their homes and offices. Well, what if one of the guests slips and falls? I cannot express how pertinent that extra coverage is in situations like this.

Accidents When Using The Things I Own

So, if you have a car or a boat like my example, you need umbrella coverage for that. If you have rental properties (which I personally have), you want to make sure you have umbrella coverage in the event something happens on your rental properties. If you frequently entertain visitors in your home, or somewhere else, make sure you have an umbrella coverage. If you have a swimming pool, swing set or trampoline (insurance agents love trampolines…NOT), then you need to have some umbrella coverage there.

Or perhaps, you’re like me and you have a couple of German shepherds who are really sweet as long as you are there with them in the yard. However, when you leave, they bark at everything from the chipmunk to the goat and honestly, you really are not sure what they will do to a human when they pull up to your house. In that case, it’s probably a good idea to get an umbrella policy…just in case.

More importantly, in the business world, there are so many legal issues that arise, you just cannot afford not to get an umbrella policy. In many instances, these policies can help when it comes to preventing lawsuits and judgments.

Helps Cover Legal Issues

An umbrella policy will at some point likely come into play with your businesses. While it may not cover something likely gross negligence, it will help cover you when it comes to common life events like accidents or legal battles. In those moments an umbrella policy may come through and save you thousands, or even millions of dollars.

A good umbrella policy will certainly help in various scenarios and are really inexpensive. Many times, they are less than a couple of hundred dollars a year. I typically recommend that business owners have at least a million to $2 million depending on the situation. Many times, it can be a lot more than that. Owning an umbrella policy sometimes can mitigate the need for an LLC or a trust for liability issues. Obviously, I’m not an attorney, but many times I’ve seen and heard attorneys suggest umbrella policies to some of my clients because of this very reason.

Another compelling reason to opt for an umbrella policy is to cover things in your home. Some insurance agents ask you to take a home inventory just to get an idea of what you have in your house in the event of unforeseen circumstances. Perhaps you miss some items and your regular policy isn’t enough to cover everything. That’s why an umbrella policy makes a wonderful addition to your insurance needs. It’s there to make sure you’ve got everything taken care of.

So, talk to your insurance agent about adding an umbrella policy. It is something I highly recommend doing. If you don’t have an insurance agent that is business owner-specific, reach out to me. I work with forward-thinking agents all over the country whom I know and trust. I can put you in touch with one of them.

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