Umbrella Insurance is one of the most important types of insurance your company can buy. It protects your business from holes or limits in existing policy coverage as well as from financially draining lawsuits. Just as you carry an umbrella to protect you from a potential downpour, this coverage protects your company from the types of claims that could close your business.
Businesses choose umbrella insurance to back up the limits contained in their underlying liability policies (commercial general liability, business auto, employer liability, workers’ compensation and professional liability.) For the most part, it is used to cover exceptionally large events or losses with low probabilities of occurrence. Without an umbrella policy, these events – as few and far between as they may be – would be financially devastating to many companies.
Who should consider an umbrella policy?
All types of companies would benefit largely from this coverage. Because it extends coverage so dramatically at a relatively small additional cost, many choose to pay the extra price. The amount of coverage needed will always depend on the total value of your assets.
How does an umbrella policy work?
Assume a jury ordered your business to pay $3 million in damages for a liability claim, but your general liability policy has a $2 million limit. Your company would normally be required to cover the additional $1 million. However, with a $4 million Umbrella policy, the $2 million commercial policy would exhaust, and then the Umbrella policy would cover the outstanding $1 million.
Workers’ Compensation is an insurance coverage that pays benefits to workers injured on the job, including medical care, part of lost wages and permanent disability. It also provides death benefits to dependants for employees killed from a work-related accident.
The Employer’s Responsibilities
Employers are required to do the following to comply with Workers’ Compensation Insurance laws:
Provide coverage for their employees and are held liable for all injuries suffered by employees while they are on the job.
Pay premiums and provide the carrier with audit payroll numbers.
Provide a safe environment.
Notify the carrier as soon as possible after an injury.
Investigate injuries.
There are other actions that your organization can take to reduce workers’ compensation costs, and we have the tools to show you how.
In the event a vital employee becomes disabled, this type of insurance provides the company with disability income checks to make up for financial loss or use for temporary replacement costs. It is designed to provide financial stability in a time of stress and anxiety due to the sudden loss of an important employee.
Who Needs Key Person Disability Coverage?
Employees who would be extremely difficult, time-consuming or expensive to replace
Highly skilled employees with unique training
Employees with exclusive ties to key clients, like sports stars
Narrow profit margins where a staff loss would mean financial trouble
Need to protect their revenue stream from loss (ex: hospitals protecting against the loss of a high-earning, respected surgeon)
Would be devastated if a high revenue-producing client became disabled and unable to perform
Key Person Disability vs. Key Person Life
When most business leaders think of purchasing key person coverage, they turn to life insurance. However, industry leaders point out that the chance of losing a key person to disability is 17 times greater than losing a key person to death, and the costs of hiring a recruiter to replace the key person and training him or her for a short period of time could be much more exorbitant than finding a permanent replacement.
Requirements and Coverage Options
To obtain key person disability coverage, the individual must be a consenting employee and you must illustrate that your business would incur substantial financial loss without him or her. To qualify as a key person, most insurers require that the employee’s salary be in the top 20 percent of the company and that he or she makes at least $110,000 in 2010. All key person policies are written specifically for the employee in question.
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