The Importance of Carrying Proper Insurance Limits

A couple of years ago, the West Fertilizer Company exploded, killing 14 people, injuring 200 others, and causing tens of millions of dollars in damage. And, it was just reported the general liability policy carried by the company only had the standard $1 million in coverage and no umbrella policy.

Unfortunately for the victims, this town, and the company itself, they only had $1 million to divide amongst all of the victims, which left most to pay for their injuries and property damage themselves.

While this is undoubtedly an extreme example of the damage a company's negligence can cause, it highlights the need for companies to carry additional insurance limits with an umbrella policy. Umbrella policies provide other insurance limits after the general liability limits are exhausted. (Unfortunately, in this case, I don't know if the company or anyone could have foreseen purchasing limits high enough to cover the damages caused by this tragic event.)

We typically recommend purchasing at least a $1 million umbrella policy for most small restoration contractors. Still, there are cases where a $5 million, $10 million, or even a $20 million umbrella is the proper amount.

If you have any questions about whether your company should purchase an umbrella policy and the proper limits to buy, don't hesitate to contact our office.