Being underinsured means your policy limits are insufficient for the total claim amount.
When that happens, the difference becomes your responsibility.
Scenario Example – Auto Claim
Policy limit: $250,000
Claim total: $600,000
Insurance pays $250,000.
Your business is responsible for $350,000.
Scenario Example – General Liability Claim
Slip-and-fall lawsuit: $1,200,000
Policy limit: $1,000,000
You owe $200,000 beyond your policy.
Why Umbrella Policies Matter
Umbrella policies provide excess liability protection above base limits.
Example:
$1M General Liability
$1M Auto
$1M Umbrella
Creates layered protection beyond primary policies.
Why Businesses Choose Lower Limits
- Premium sensitivity
- Misunderstanding exposure
- Minimum compliance mindset
Minimum compliance is not risk management.
How to Evaluate Proper Limits
Consider:
- Revenue size
- Asset exposure
- Vehicle count
- Industry risk
- Contract requirements
- Litigation environment
Final Thoughts
Underinsurance does not feel expensive — until after a claim.
Proper limit selection protects cash flow, assets, and long-term growth.
For a liability limit review, contact Prosperity North Advisors to schedule a consultation.