Do restoration contractors need umbrella insurance?

April 28, 2016


Umbrella insurance is a broad type of coverage used to protect restoration contractors for liability that exceed the limits of the underlying insurance policies.  It also can kick in to fill in gaps that other policies don’t cover.  It can give you access to higher limits of protection from risks, at an affordable rate.


Increased financial protection from unexpected risks
Even if your business is already covered under a General Liability Insurance policy, you might face a legal judgment or settlement—or a costly repair—that exceeds your coverage limit under that policy. Just as an example, say you carry $1 million in General Liability and are required to pay out $2 million for a judgment resulting from an accident that took place at your company. If you carried a $1 million Umbrella policy, it would cover what your General Liability didn’t—saving you from having to pay those funds out of pocket, or selling off assets to cover the difference.


May cover additional liabilities not covered by other policies
Many umbrella policies may kick in to cover damage or losses that aren’t covered by a primary policy like General Liability, acting as first-dollar coverage. In the language of insurers, the policy “drops down” to cover the liability as the primary insurance. This typically occurs with coverages excluded from a standard General Liability policy; some examples of this kind of coverage are non-owned watercraft and aircraft, and advertising liability.


As with any risk protection strategy, you first need to evaluate the risks faced by your restoration company. You should consider factors such as how much contact your business has with the public—and the potential for lawsuits. This “contact” includes not just customers but also suppliers, partners, and other associates. Do you have a lot of employees? If yes, then you have many points of contact with the public.


If you decide to take out an umbrella policy, make sure that it is concurrent with your primary policies—that they cover the same time periods.  Otherwise there could be a potential gap in the coverage that could leave you exposed to litigation.

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