Confusion over what insurance policies cover – and what they don’t – has been around as long as commercial insurance. Some might say this vagueness is even intentional on the part of traditional insurance carriers. Case in point? Umbrella Insurance.

Umbrella Insurance Defined

Umbrella insurance is a type of liability insurance that provides coverage beyond the limits of your other insurance policies. It can also provide coverage for some claims that your other policies may not cover. It works by kicking in after the limits of your other liability insurance policies have been exhausted. For example, if you are at fault in an incident that causes $500,000 in damages, and your policy has a liability limit of $300,000, your umbrella insurance policy would cover the remaining $200,000.

Captives Insurance as a Force Multiplier

Umbrella insurance is a valuable risk protection tool – but that “umbrella” doesn’t account for everything. That’s where Captive insurance comes in.Captive Insurance can provide an effective 1-2-punch, in conjunction with umbrella policies. Here’s how:

1. Filling Gaps in Coverage

• Economic Losses: Traditional general liability and umbrella policies are designed to cover liability exposure. Captive insurance is designed to cover economic losses from unforeseen events for which you likely cannot get commercial coverage. Examples would include loss of key customers or contracts, economic losses from product recalls, etc.
• Unique or Excluded Risks: Your business may also have unique risks that are difficult or expensive to insure in the traditional market. A captive can be tailored to address these specific risks, providing coverage that your umbrella policy might not.

2. Enhancing Your Existing Coverage

• Higher Limits: A captive can further increase policy limits – crucial for businesses facing potentially large or catastrophic claims.
• Deductible Management: Captives can also be used to manage deductibles on your other insurance policies, including your umbrella policy, helping you reduce costs and improve cash flow.

Better Together

Captive insurance is not meant to replace your umbrella policy. Instead, it complements it by providing additional layers of coverage and financial benefits. It’s all about creating a comprehensive and customized risk management strategy that best suits your specific needs.

‍