Commercial Lines April Newsletter Update

Understanding Umbrella (Excess Liability):

The business insurance team at CAL represents some wonderful and very impressive businesses, schools, nonprofits and real estate investors/investment groups from coast to coast.   A common mistake many businesses, schools, nonprofit and/or real estate investors make is to think an umbrella policy has anything to do with property insurance limits/replacement cost.   We have heard this all before…. “I understand my building has a replacement cost cap of $4.7M but I do have a $10M umbrella too, so I am fine, right?”.  Sometimes people have described an umbrella as a “catch all” policy but that is simply not true either.   Instead, we want clients to think of umbrella as “excess liability”.   A standard general liability policy typically offers $1M per occurrence with $2M in the aggregate.   A standard commercial auto fleet policy has a $1M limit.   What an umbrella (excess liability) policy does is simply add higher limits.   For example, if a business purchased a $5M umbrella that could extend the insurance limits, typically, over general liability, the auto fleet liability and also something called Employers Liability under the workers compensation policy.   So, instead of having a $1M general liability limit, if you have a $5M umbrella, you now have a $6M general liability limit.   Umbrella serve as extra protection and also as a necessity in some contractual obligations such as leases and customer contracts.  Your professional insurance advisors welcome the conversation about what umbrella options might be right for your business, school, nonprofit or real estate investment(s).