An umbrella insurance is the insurance companies’ answer to a common plight of policyholders: they are never sure that their insurance policy coverage will cover exactly the very specific damage they have suffered.
This is often true, and the problem is that this may have very severe consequences if the policyholder is a company. Exclusions and limitations, in case severe events happen related to public liability insurance, product liability insurance or employers’ liability insurance policies can lead to damages worth millions of pounds, and the business may simply disappear if the unfortunate event which happened is in fact not covered by the insurance policy.
Umbrella insurance is designed to come into play when other existing insurance coverage find their limitations. It provides additional coverage when needed. If a company is sued for £5,000,000 of damages but is only covered for up to £4,500,000, the umbrella insurance will provide the extra £500,000, simple as that.
Insurance agents will tell you that umbrella insurance policies, for just a few dozen pounds per year, protect businesses in situations when the exact extent of the coverage of existing business insurance policies can make or break the future of an organisation, save a business or take it to the grave.
Umbrella insurance policies and other existing business insurance policies should therefore not be considered mutually exclusive. In fact, an umbrella insurance policy should be considered a continuation, and extension, and add-on to the latter.
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