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Commercial Umbrella Insurance for Financial Services

Commercial Umbrella Insurance for Financial Services

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With high-dollar claims and lawsuits on the rise, are you prepared for the day when your financial services firm causes a very serious accident or third-party property damage? Although financial services firms aren’t exposed to as many physical risks as in other industries such as construction, businesses in this industry can still be high stress and therefore put employees at high risk for accidents, illnesses, or injuries. Financial firms also frequently interact with outside clients, partners, and vendors, which exposes these firms to risks of injury and property damage.

As a financial services firm, you’ll likely already have several major liability policies—a commercial general liability policy, commercial auto policy, and employer’s liability policy—but what happens if you exhaust the limits of these coverages? That’s where Commercial Umbrella Insurance can step in to provide you an additional layer of coverage.

What is Commercial Umbrella Insurance for financial services professionals?

Umbrella Insurance covers the same types of liability your primary liability insurance covers and simply increases the coverage to a higher dollar amount. You may have multiple claims in a year or a large settlement, requiring financial resources that exceed the limits of your primary liability policies. Commercial Umbrella Insurance essentially serves as an additional safety net that kicks in when the existing limits of these three liability policies are exhausted:


Commercial Umbrella Insurance isn’t usually sold as a standalone policy. Generally, you’ll need to purchase a primary line of liability insurance (general liability, commercial auto, or employer’s liability) before you can purchase Commercial Umbrella Insurance. You may be required to purchase a minimum amount of the underlying insurance before you become eligible to purchase Umbrella Insurance, e.g. $1 million limit for general liability and $1 million limit for employer’s liability insurance.

Commercial Umbrella Insurance not only can extend your current liability limits, but it also can expand your coverage into areas not originally covered by your primary insurance policies. This is the primary difference between Umbrella Insurance and excess insurance. While excess insurance only extends coverage, Umbrella Insurance can actually broaden your coverage.


Why might financial services professionals need Commercial Umbrella Insurance?

As a financial services firm, you are well aware of the risks in the market. While a stock market crash may not happen all the time, a sound investment firm has certainly put in safeguards to protect against such an event. The same is true of insurance. While accidents or catastrophic damage might not occur frequently, it may still be wise to be prepared with the right financial protection in the case of an unfortunate event.

The following are a few scenarios in which your financial services firm may opt to secure Commercial Umbrella Insurance:

What are the key exclusions of Commercial Umbrella Insurance for financial services professionals?

Contrary to popular belief, Commercial Umbrella Insurance can’t provide additional coverage for all types of claims. Here are some key types of claims that Umbrella Insurance generally will not cover:

Commercial property insurance – Commercial Umbrella Insurance usually does not cover property damage claims, unless it’s third-party property damage relating to general liability.

Professional liability insurance – Commercial Umbrella Insurance usually does not cover professional liability claims and lawsuits.

How much does Commercial Umbrella Insurance for financial services professionals cost?

Pricing for Commercial Umbrella Insurance will depend on a number of factors, including:

There’s a lot of variation in the pricing, but small businesses can expect to pay annual premiums between $750 and $1500. Many small businesses find purchasing Commercial Umbrella Insurance to be an attractive option since it features relatively inexpensive premiums for a high dollar amount of coverage. You also have the option to raise the limits of your commercial general liability, commercial auto, and employer’s liability insurance, but it may be more expensive than purchasing Commercial Umbrella Insurance.

Umbrella insurance can be a cost-effective way to add to your insurance coverage, as the premiums on umbrella insurance are usually lower per additional dollar of coverage than the premiums on your primary policies. The reason for the lower premiums is that the umbrella policy does not pay out until your primary insurance policy is fully exhausted.

What is the “duty to defend” for Commercial Umbrella Insurance?

Most liability policies require insurers to defend the insured against lawsuits, called the “duty to defend.” For Commercial Umbrella policies, however, the “duty to defend” is sometimes limited or non-existent.


Final Word

A financial services business involves frequent interaction with clients, partners, and vendors—some of whom will be high net worth individuals—as well as potentially high-stress work. If you are not prepared for catastrophic events that may happen or multiple claims in a short amount of time, your firm may be financially vulnerable. Commercial Umbrella Insurance will provide an additional layer of coverage for your primary lines of liability insurance, giving you financial protection and peace of mind as you build your business.

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