Protect yourself Personally to Protect your Business

As a Business Risk Advisor, I am often looking over Business Insurance policies, doing risk management worksheets, and asking lots of questions to make sure my clients business' are protected properly.   We talk about carrying proper limits on General Liability, Auto Liability, & workers compensation.  We even talk about Umbrella coverage, that increases these limits even more. Since I and many advisors specialize in commercial only and don't provide  personal insurance, this is one thing that can get overlooked by your personal lines insurance agent.  There is a flood of Internet based insurance companies now providing coverage for Auto, and Homeowners.  There are equally, personal lines insurance agents that do not ask the proper questions to cover the Business Owner as he needs to be covered for his personal exposures.  As the Allstate commercial says, "your 15 minute insurance may not protect you".

Many business owners protect themselves by purchasing high limits of insurance and setting up multiple companies to keep their assets protected.  You need to spend equal time making sure you have your personal coverages set up properly.  (For Example:)

My employee is driving a delivery truck and causes a multi-car accident in which there are several serious injuries.  A large award is given and I have enough coverage with my auto and umbrella liability to pay the claim.  As a backup to keep them away from my personal assets, I have the protection of my corporation or LLC. 

What if I have this same accident on my way home in my personal vehicle and I don't enough insurance limits to cover this claim?  Once they get a judgement, they can go after my personal assets.  If that is not enough they can come after my ownership in my company or it's assets.  The price to increase my personal auto limits is very reasonable and would seem cheap now.

I recommend you look at your personal liability limits under your homeowners insurance, personal auto, and any other recreational vehicles or boats you have, and increase them enough that you can buy a personal umbrella to extend all of those limits to between $1,000,000 and $10,000,000 depending on your needs.  Personal Umbrella's cost start at a couple of hundred dollars a year and go up from there.

Thanks to Chris Griswold, Attorney, for his help on this article.

Commercial Umbrella Liability–What Limit Should I carry?

Umbrellas and Excess policies are important because they give you additional (higher) limits on multiple policies by purchasing one policy.  Most cover General Liability, Automobile, and the Employers’ Liability part of Workers’ Compensation Insurance. Umbrellas are written on their own form and often contain broader coverage than their underlying policies plus they offer drop down coverage for these situations.  Excess policies follow the underlying policies and are only as broad as the polices they encompass.

I have been asked several times what Umbrella Limit a company should carry? While there is no definitive answer to this question, companies should begin their analysis by using the net worth of their company as a guideline.  For example, the more you have, the more you should carry. Companies with substantial property values that have appreciated over time should look to  more than just their financial statements to determine asset values. They should also look at the current market value of their properties. 

We all hear of large losses that put companies out of business, where there could not have been enough coverage purchased to cover the loss. I have personally seen accidents that exceeded $2,000.000 but I have not seen anything over $5,000,000.   This is why I am a proponent of dividing your companies into separate entities if it makes sense to do so. Whether or not you do this, keep in mind that the higher limits you obtain, the less each incremental layer will add to your premium. For example, let’s say the first $1,000,000 of the umbrella  costs $2,000.  The next $1,000,000 might cost $1,000 and the 3rd $1,000,000 might cost $500 for a total premium of $3,500 for a $3,000,000 umbrella.

Whatever you do, take the time to properly protect your company.  You spent a lot of time building your business, so spend the time to make sure you get to keep it.