Commercial Excess Insurance: Protecting Your Business When Accidents Become Tragedies
Businesses are never immune to unexpected accidents, no matter how grand. Standard liability policies like commercial auto, general liability, and workers’ compensation do provide initial protection, but limits are likely to be exhausted in serious accidents. That’s where your commercial excess policy saves the day when your primary insurance is exhausted.
How Does a Commercial Excess Policy Work?
The main purpose of a commercial excess policy is to be your safety net when your underlying policy is exhausted. When the limits of a primary policy are exhausted, the excess policy takes over, covering any additional damages up to its limits. This saves your business from financial devastation due to large claims.
What Is “Follow Form” Coverage?
Various excess policies “follow form,” – this means that they imitate the terms of the primary policy. However, this is a rare case. Most policies align with key aspects like insured parties, exclusions, and limits, but they still require careful analysis to avoid coverage gaps.
Understanding “Drop Down” Coverage
Let’s suppose your underlying policy’s limits are exhausted. In that case, drop-down coverage would fill the gap, ensuring claims are still paid. Without this coverage, your business could face significant out-of-pocket expenses.
What If Underlying Policies Are Not Maintained?
An excess policy only kicks in if the underlying policies are maintained and only after the policy limit of the underlying policy is exhausted. To add, if your underlying policy is expired or un-renewed, your excess policy will not automatically cover up for your loss – and you might have to incur out-of-pocket costs. Therefore, to sum it up, your excess policy is an ADDITION to your primary policy, and that means it is important to maintain your underlying policy.
How is an Umbrella Policy different?
An umbrella policy offers both additional coverage and extended limits for risks not included in underlying policies – for example, global operations, advertising injuries, and mental anguish claims. However, as a business owner, you might need to pay a self-insured retention (SIR) before it applies.
Choosing the Right Limit
This entirely depends on your business’s risk exposure. For example, if you belong to the construction industry, you may require higher limits as you and your employees are at a high risk. Other industries might base their decisions on past experiences and asset protection needs. An insurance expert can help you determine the best coverage for your needs.
Accidents are inevitable. But that doesn’t mean that it should destroy your business. Staying prepared and taking proactive steps is essential. A commercial excess or umbrella policy can provide you with essential protection when your primary insurance may be inadequate. If you want to get your coverage reviewed by an expert who could help fill gaps, contact us today.
For expert advice, contact Shayne Bevilacqua at Professional Liability Insurance Group.
Call or Text us at +1 (877) PLIG – 123, That’s (877) 754 – 4123
