In what scenarios would a company consider purchasing an umbrella insurance policy?

A company would consider purchasing an umbrella insurance policy primarily to provide additional liability coverage above the limits of standard commercial policies. Umbrella insurance acts as a supplemental layer of protection that kicks in when the liability limits of underlying policies, such as general liability or auto insurance, are reached.

This is crucial for businesses exposed to potential large claims, as typical liability policies may not cover the full extent of damages in certain instances, such as catastrophic accidents or significant lawsuits. The umbrella policy helps safeguard the company’s financial health by providing an additional safeguard against substantial claims that could otherwise lead to significant out-of-pocket expenses.

In contrast, focusing on just covering physical assets, employee health benefits, or ensuring accurate property valuations does not address the core function of an umbrella policy, which is specifically designed for enhancing liability protection.