The Contract Clause That Wants More Coverage
"The client we're bidding wants five million dollars in liability coverage. Our policy tops out at one." It's one of the more common calls an agent gets, and it usually isn't a sign that something has gone wrong. More often, it's a sign the business has grown into a larger contract than it has bid on before.
So what do you do when the limits a contract asks for are higher than the limits you are carrying?
That is where commercial umbrella coverage comes in.
What commercial umbrella actually does
Commercial umbrella coverage sits on top of your general liability and commercial auto and picks up where those underlying limits end. If a covered claim exceeds what your general liability policy pays out, the umbrella policy can extend that protection further, up to its own limit.
One thing worth knowing up front: umbrella coverage generally won't cover something your underlying policy excludes. It extends the depth of coverage you already have. It doesn't broaden what's covered to begin with.
Why does it often come up with bigger contracts?
Growing businesses tend to run into this the same way: a new client, a bigger project, or a general contractor asks for liability limits well above what the business has carried. Rather than raising the limits of several policies separately, a commercial umbrella is typically one of the more efficient ways to raise them all at once.
That's also why the conversation belongs before a contract is signed, not after. Finding out your limits fall short after you've already won the bid is a tougher spot than checking ahead of time.
A question worth asking regularly
Has a contract ever asked your business for higher limits than you were carrying at the time? If the answer is yes, even once, it's worth checking where your limits stand against the kind of work you're bidding on now, not the kind you were bidding on a few years ago.
The bottom line
Growth is a good problem to have, and the insurance side of it doesn't need to be complicated. A commercial umbrella policy is one of the more straightforward ways to keep your coverage in step with the scale of the work you're pursuing.
Bidding on bigger contracts, or just due for a limits check? Reach out and let's run the numbers together.
This content is from sources believed to be accurate and is for general information only, not tax or legal advice. Consult appropriate professionals for your individual situation. Copyright FMG Suite.
