Driving a vehicle for business exposes both the business itself, and its employee vehicles and drivers, to significant financial risks that might come up when accidents occur. Every vehicle and driver pose accident risks to every other vehicle and driver they encounter, and if an accident is the business’s fault, then they might have to use their commercial auto liability insurance to pay for the damage they caused. It’s important for every commercially-insured vehicle to have this coverage. However, additional protection called commercial umbrella insurance may be necessary. Here’s how your commercial auto and commercial umbrella policies can work together.
Commercial Auto Liability Insurance
Most states require nearly all registered drivers have to carry insurance coverage on their vehicles. Drivers of commercial vehicles, either owned by or used by the business, are no exception. Usually, commercial drivers must carry at least the same limits required of every other driver, and in many cases, they must buy additional coverage as required by state or industry regulations.
Among the most-common coverage required of all drivers—including commercial drivers—is auto liability insurance. This coverage helps an insured driver pay in case they are at-fault for an accident that harms other people. It allows them to compensate the affected third parties. Most policies offer:
- Bodily injury liability coverage that pays for third-party injury costs.
- Property damage liability coverage to cover losses to other parties’ property (i.e. damage to their cars).
In Florida, all drivers must carry property damage liability insurance, but not everyone has to buy bodily injury coverage. Instead, all drivers must have no-fault personal injury protection (PIP insurance), which allows them to file against their own policy for their injury bills, rather than filing against someone else’s bodily injury liability coverage. Still, some drivers choose to buy bodily injury liability coverage as well, because it allows them to protect themselves in case someone does try to pursue them for injury costs after they file against their PIP coverage.
So, if a commercial driver has a wreck, and that wreck harms someone else, then the business’s auto liability coverage can help compensate that person. However, when a liability policy cannot adequately compensate third parties for accident losses, then it’s time to turn to your commercial umbrella policy.
Commercial Umbrella Insurance
Commercial umbrella insurance exists to help you out when your standard liability insurance won’t. Once your policy pays up to its stated limits, it will not pay any additional coverage. So, if you carry $500,000 in bodily injury liability coverage, but someone sues you for $700,000 in medical costs, that’s a $200,000 difference between what your policy will pay, and what remains for you to pay on your own.
An umbrella liability policy is another type of commercial insurance that will offer you protection in case a liability claim exceeds the limits of your standard policy. It can provide excess liability coverage for many of your commercial liability policies—like your general liability and cyber liability coverage—in addition to supplementing your commercial auto insurance.
So, if you have only $500,000 bodily injury liability coverage on your commercial auto policy, and someone sues you for $700,000, then you will make an initial claim on your commercial auto policy. The policy will then pay up to $500,000 towards that person’s injury costs. Only once the policy pays to its maximum can you turn to your umbrella policy. It can provide up to $200,000 to settle the claim.
There are a few things to keep in mind when getting this coverage. For one of your standard commercial liability policies to qualify for umbrella protection, you might have to carry the maximum available limits on the standard policy. However, the good news is that commercial umbrella policies coverage can often provide at least $1 million in additional protection, so by getting it, you’ll receive a very high amount of protection in case of severe accidents.