Why Is There an Upward Trend in Umbrella Insurance Costs in the Commercial Market?

May 10, 2023

Commercial Auto Insurance

Why Is There an Upward Trend in Umbrella Insurance Costs in the Commercial Market

With a majority of the businesses in the country living under the constant threat of being sued for one reason or another, as a business owner, your priority must be to get adequate liability insurance coverage. Besides your business reputation being negatively impacted, not having sufficient insurance to cover the associated costs of a lawsuit can spell financial disaster for your business. Buying umbrella insurance helps to enhance your liability coverage and helps you to stay better prepared for lawsuits.

In this blog, we will discuss why you must have umbrella insurance, how it differs from other coverages, and why its rates are on the rise.

What Is Umbrella Insurance?

Umbrella insurance is excess liability coverage that covers the surplus costs when the coverage limit of your existing business liability insurance is exhausted. It adds an extra layer of liability protection for your business.

Importance of Having Umbrella Insurance

If your business is sued and you are found liable, the expenses that you may incur as the settlement and legal costs may exceed the coverage limit of your liability insurance. The out-of-pocket payment of the balance amount may prove to be financially damaging for your business, as it has been the reason for several small businesses closing shop. The umbrella coverage covers the balance amount and saves you from suffering huge losses.

Difference Between Umbrella Insurance and Other Insurance Coverages

You cannot buy umbrella insurance if you don’t already have the following coverages for your business:

It cannot be bought as an independent policy but as a second policy that boosts the coverage of the above-mentioned insurance.

Why Is It Difficult to Estimate Umbrella Insurance Policy Costs?

When it comes to the cost of your umbrella insurance, the process of estimating the insurance cost can be a little complex for your insurance provider. Essentially, they will be assessing your liability coverage claim history to calculate the cost. While smaller pay-outs do not pose much of a problem, they may find it difficult to calculate your insurance costs for big pay-outs.

Reason for the Increase in the Umbrella Insurance Costs

In recent times, there has been an upward trend in umbrella insurance costs. One of the factors that are responsible for this increase is the rise in motor vehicle accidents. With more commercial vehicles on the road despite technological innovations, several accidents are on the rise, which leads to expensive lawsuits.

How Does Market Volatility Affect Umbrella Insurance?

With the courts deciding on large amounts as compensation, insurance providers have to shell out more money more frequently. This increased amount that they pay as settlement is collected by them as higher umbrella insurance premiums.

Impacts on Umbrella Insurance

Having umbrella insurance is even more important now with a spike in expensive lawsuits against businesses. The increasing umbrella insurance rates too corroborate the fact that it is an essential coverage that you must have.

Ensure Adequate Coverage for Your Business with Knight Insurance Services

If you are looking for commercial umbrella insurance, you should contact our expert team today. With more than 100 years of experience at Knight Insurance Services, we have the expertise to provide you with the right umbrella insurance coverage based on your unique business requirements and budget.