Nicholas Taleb’s book, “The Black Swan,” examines the impact of rare and extreme events. He suggests the solution for businesses is not to try and avoid these unpredictable events, but to develop robustness to ensure their survival.
Many businesses do not account properly for these black swans. Consequently, they are at risk of being destroyed by a rare but devastating incident. Small businesses are at particular risk because they tend to be underinsured. According to statistics released by Bolt Insurance agency, 57 percent of lawsuits affect businesses with less than $1 million a year in revenue. What’s worse is that the size of the claims can be crippling for a small business. The average amount that a jury awards to plaintiffs in a construction or industrial liability lawsuit is more than $1.25 million.
One of the best ways that businesses can protect themselves from these outliers is through commercial umbrella insurance.
An Overview of Commercial Umbrella Insurance
Commercial umbrella insurance provides another layer of protection beyond any other policies a business owner might be carrying. If business owners find themselves facing a settlement, repair costs or judgment that is a greater amount than what’s covered by their other policies, their umbrella insurance can cover the excess amount.
Two Ways Umbrella Insurance Can Protect Businesses
Umbrella insurance expands the amount of coverage business owners have for existing liability policies. For example, they might currently have general liability insurance for $1 million and auto liability policies of $500,000. They could expand their coverage by adding an additional $1 million in umbrella insurance. If they faced a claim of $1.5 million on their general liability policy, it would be covered by their umbrella insurance.
Also, umbrella insurance protects businesses from events that may not be covered in their existing policies. For example, their existing auto liability insurance may only cover accidents that occur during normal business operations. If an employee injures someone in a company car during their own time, the business might still be liable. Umbrella insurance would help cover this unforeseen event.
High-Net-Worth Individuals Pose a Unique Risk
Companies that conduct business with high-net-worth individuals should strongly consider umbrella insurance, since these individuals pose unique risks. For example, if a business damages the reputation of the CEO of another company, they might be found liable for the other company’s lost earnings. Considering that the average salary of a CEO was $9.7 million in 2012, a single lawsuit can put a small company out of business.
How to Get the Right Umbrella Insurance
No two businesses are alike, and therefore, their liability needs will also differ. In order to ensure that a business is fully covered, business owners need Minneapolis business insurance that is customized for their situation. An independent insurance agent can help business owners find the right insurance for their company.
Looking for the best solution for protecting your business? Call Lancette Agency at 651-264-1230 and talk to a qualified independent insurance agent now.