An umbrella insurance policy is a type of an extra liability insurance used by many businesses. This insurance is crafted to protect the insured against significant claims and lawsuits and ultimately helps to protect the insured’s assets and the business future.

An umbrella insurance policy provides the following coverage:

  • Injuries
  • Personal liability situations
  • Damage to property
  • Certain lawsuits

Many insurances cover the above points, but the primary feature of an umbrella insurance policy is that it insures above and beyond the limits of those policies and covers some situations that aren’t covered by the other types of policies.

Following are the features of an umbrella insurance policy:

This type of liability insurance offers a broad protection, and as said above, it covers the insured above and beyond the limit of a liability insurance. Thus, it provides an extra layer of liability protection. Without commercial umbrella insurance, businesses would be obligated to pay out of pocket for legal fees, damage expenses, and medical bills that exceed the limits of their business coverages.

The insured also gets the replacement of primary coverage once the primary aggregate limits of the liability have exhausted or reduced.

For any uncovered claim by an underlying policy or when the limits of liability have been exhausted, the umbrella coverage covers the defence cost as well. Anyone who has underlying commercial liability policy is eligible for a commercial umbrella liability policy.

This type of excess liability coverage provides protection against the possible devastating economic losses too.

Umbrella insurance policies cover for significant property damage where the standard insurance liability limit may be exhausted when the insured is at fault when he destroys another vehicle and other property.

It covers for serious bodily injury where the current insurance liability limit is insufficient to cover medical and other costs related to a third-party bodily injury in particular premises.

It also covers for libel or slander where lawsuits result from something that insured says or writes about another person or business.

Read more: What is a Liability Umbrella Insurance Policy?

It covers for malicious prosecution, where the insured has filed a suit against someone and in turn is sued for the wrongful, or malicious prosecution of that individual.

Case Study:

‘Intelligent SoftTech’, an IT company in Mumbai was well-known since the last seven years of its inception. With talented employee base and successful management, the profit numbers of the company were showing year-on-year growth. Being in the growth stage currently, the company increased its operations, verticals as well as employee count.

The management of the company thought that it is essential to have insurance policies for different needs of the company. By contacting a well-known insurance company, the management acquired various policies to secure and protect the company in its growth stage.

One day, a telephone repairman arrived at the office building of ‘Intelligent SoftTech’ to make repairs in disconnecting network on a rainy day. On his way to one of the interior stairwell, he slipped on the slate stair and had a massive fall. Nobody had the idea of the accumulated water on the stairs.

Due to the severe fall, the telephone repairman had to undergo several knee, back and neck surgeries and even start using a cane. A claim was filed against the IT company for the bodily injuries on their premises.

Read more: What is Property Insurance?

The jury found the company responsible for the fall and awarded the telephone repairman seven lakhs for the injury caused.

The IT company, however, had a commercial general liability insurance with a limit of rupees 5 lakhs. Fortunately, the company had even purchased an umbrella insurance coverage.

Due to the extended coverage offered by the umbrella policy, the IT firm was able to cover for the additional amount of two lakhs to the telephone repairman.

Thus, ‘Intelligent SoftTech’, was protected against the claim that was not covered by its general liability insurance limit. The policy also helped the company to cover the additional defence and attorney fees associated with the claim.