Accidents Happen, Protect Your Dealership with Commercial Umbrella Coverage
Mishaps and accidents happen at dealerships. And, sometimes even the most insignificant incident turns into a financially devastating multi-million-dollar lawsuit that can place your hard-earned assets in jeopardy. Protecting your dealership means preparing and planning for the worst-case scenario.
For example, suppose a customer suffers an injury on the property and sues your dealership. Or, your parts driver is involved in an accident with injuries to multiple people. What happens if the judgment exceeds your policy limits? How will you offset the remaining balance?
Standard policies help protect your dealership from a broad range of situations. Yet, there is always a chance of encountering a loss that surpasses the limits on your garage liability coverage. Therefore, all dealerships can benefit from purchasing the excess protection that commercial umbrella insurance provides.
Commercial Umbrella Coverage
Commercial umbrella insurance extends coverage beyond your garage policy for claims that exceed the underlying limits and provides increased protection to offset potential losses. Furthermore, it shields your dealership from the devastating impact on your business operations, brand reputation, and financial stability.
When a claim exhausts the policy limits, this type of coverage handles the remaining expenses. Additionally, it can sit on top of other policies such as general liability or workers’ compensation.
Coverage Gaps
Do not get confused by the inclusive name. One of the most prominent misconceptions about commercial umbrella insurance is it will provide coverage for anything your other policies cannot. There are several areas where it will not extend. Some of these include pollution, employment practice liability, and recall of products, work, or impaired property. Also, some commercial umbrella policies contain self-insured retention (SIR), which represents the amount your dealership could pay out of pocket for each occurrence.
When evaluating the coverage, carefully consider the terms and conditions of the umbrella policy and review the list of excluded items. Furthermore, recognize the areas where your commercial umbrella will not respond and ensure the underlying limits for these are adequate.
Cost of Commercial Umbrella Coverage
Commercial umbrella pricing is typically a predetermined rate based on the underlying premium. Underwriters will look at the exposure inside the garage policy to develop pricing. Additionally, the underwriters review demos and the number of Dealer Tags to assess the potential umbrella exposure.
With commercial umbrella policies, the primary layers are always the most expensive because the insurer’s exposure is more extensive. As a rule of thumb, you can expect to pay 30 to 35 percent of your garage premium for the first $5 million in commercial umbrella coverage, with the price for higher layers reducing proportionately.
Remember, these costs will be insignificant compared to the expense of an adverse jury award that exceeds your insurance policy. It is essential to have sufficient commercial umbrella coverage as a form of risk management.
A Good Risk Mitigation Investment
We live in a litigious society. Given the high risk of third-party liability claims, there is always the possibility that your business could end up facing a lawsuit. No matter how much you put into safety and prevention at your dealership, accidents are out of your control and will happen. Being unprepared can be catastrophic and financially devastating to your dealership. Therefore, commercial umbrella insurance is about being ready for the unexpected and having a fail-safe in place. It is the right risk management strategy for any dealership serious about success and staying afloat.
Understanding the coverage nuances will put you in the driver’s seat with your dealership insurance program for years to come. Now is the time to review your commercial umbrella coverage and act!
