Umbrella insurance is supplemental coverage above primary liability policies. Most umbrella policies require underlying primary insurance policies to be active, such as commercial general liability insurance and auto insurance (if applicable). If your financial services business has a claim that exceeds its primary insurance limits, then umbrella insurance will cover your business for the excess losses.
For example, consider a situation where you are sued and the judgment against your firm is for $1.5 million. If you have general liability coverage of $1 million and umbrella coverage up to $3 million, the general liability will cover the first $1 million, and the umbrella coverage will cover the remaining $500,000 of liability.
This is a cost-effective way to bolster your coverage because umbrella premiums are often lower per dollar of coverage than primary policies. The reason for the affordable nature of umbrella insurance is that the coverage does not kick in until you exceed your primary policy’s limits.
Importantly for financial professionals, umbrella insurance usually excludes coverage for professional liability.
Other common exclusions from umbrella insurance policies often include:
- Data Breaches
- Aircraft, Watercraft, and Product Recalls