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Commercial umbrella insurance
Commercial umbrella insurance
Once a policy’s limit is reached, commercial umbrella insurance provides additional coverage for liability claims made on general liability, commercial auto, or employer’s liability insurance.
Why is commercial umbrella insurance important?
Business owners who purchase commercial umbrella insurance usually need it to fulfill a contract that requests higher than standard policy limits.
Commercial umbrella insurance offers extra liability coverage for the most expensive lawsuits. For example, if a covered lawsuit maxes out your general liability insurance policy but you still owe money for damages, business umbrella coverage can provide additional funds to make up the difference.
Umbrella liability insurance can supplement your coverage provided by:
- General liability insurance
- Employer's liability insurance (often included in workers' compensation)
- Commercial auto insurance or hired and non-owned auto (HNOA) insurance
Commercial umbrella insurance can boost coverage for any (or all) of these policies in $1 million increments. Before you can purchase umbrella liability insurance, however, an insurer will require you to carry a certain amount of coverage for the underlying policy.
Businesses that buy umbrella insurance coverage:
- Have insurance but need to close the gap on requirements above $2 million
- Have high liability risks, such as a business location with a lot of foot traffic
- Need more liability protection across several policies
What does commercial umbrella insurance cover?
Commercial umbrella insurance policies have the same terms and cover the same risks as the underlying business insurance policy.
Specifically, umbrella insurance can help provide additional coverage for the following:
Slip-and-fall injuries
When you add commercial umbrella insurance (or excess liability insurance) to your general liability insurance, it can cover your legal expenses if someone gets injured on your business property.
Third-party property damage
When you add commercial umbrella insurance to a general liability policy, it helps pay for legal bills related to destroyed or damaged third-party property.
Car accident liability
When you add commercial umbrella insurance to a commercial auto insurance or hired and non-owned auto insurance policy, it helps cover costs if someone sues for damages caused by your vehicle.
Employee injury lawsuits
When you add commercial umbrella insurance to employer's liability insurance (typically included in workers' compensation insurance), it helps pay for employee lawsuits over work injuries.
How much does commercial umbrella insurance cost?
For Insureon customers, commercial umbrella insurance costs on average about $75 per month for each $1 million of additional coverage.
Several factors affect umbrella policy costs, including:
- Industry and risk
- Coverage limits
- Location
- Number of employees
- Number of vehicles
How does commercial umbrella insurance work?
Think of commercial umbrella insurance coverage as a safety net. Your other liability policies are your first line of defense. When you need an added layer of protection on a claim that exceeds the limits of your primary policy, your business umbrella insurance can pick up the slack.
Here's when you need it
Let's say you have a commercial general liability policy with a $2 million per-occurrence limit, which means it can pay up to $2 million toward your legal expenses.
If a client suffers a serious injury after tripping and falling at your business, and decides to sue, the medical expenses, legal fees, and damages could add up to $2.5 million. After hitting your general liability limit, you would still have a $500,000 bill.
Here's how it helps cover expenses
An umbrella liability policy can help cover the expenses that exceed your underlying policy's limit. For the case above, a business umbrella policy would cover the additional $500,000.
Basically, you can make a claim on umbrella insurance when each of the following occurs:
- Your business is sued over third-party bodily injury or property damage.
- The cost of the lawsuit is more than the limit of the underlying coverage.
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How does commercial umbrella insurance work?
Commercial umbrella insurance can serve as an extra buffer of financial protection if your business exceeds its other forms of coverage. Find out how this policy works.
Who needs a commercial umbrella policy?
Commercial umbrella insurance used to be a policy that only big businesses bought. These days, more small businesses invest in commercial umbrella insurance due to the rising cost of lawsuits and medical expenses.
You should consider an umbrella liability policy if:
You want to sign a big client who requires more liability insurance
Umbrella coverage helps close the gap on contract requirements over $2 million.
For example, if a general contractor is bidding for a project and the client contract required a general liability policy with a $5 million per-occurrence limit, an umbrella policy of $3 million would be added to the contractor's existing $2 million general liability policy.
You have lots of contact with the public
The more foot traffic a business has, the greater its liability risks.
For example, if a customer trips on an uneven step at your restaurant and sustains serious injuries that leave them with a chronic health problem, they could decide to sue for $3 million in damages to recoup the cost of medical expenses.
If your restaurant's general liability policy has a per-occurrence limit of $2 million, umbrella insurance would cover damages beyond the initial $2 million, up to the umbrella policy's limits.
Your business owns vehicles
A business with a fleet of vehicles might want coverage to protect against the cumulative costs of minor vehicle accidents.
For example, if a window installer driving a company van to a job site accidentally causes a pile-up, the other drivers could decide to sue for damages.
An umbrella liability policy could cover the window installation business's legal defense costs once the auto policy is maxed out. It would also cover damages paid to other drivers in the form of a settlement or court-ordered judgment.
Your work is hazardous
The more hazardous the work, the greater the risk of employee injury – especially in industries such as construction or installation.
For example, a long-time employee at an HVAC installation company sues her employer over a chronic back injury from lifting heavy equipment.
An umbrella liability policy added to employer's liability insurance guards against these types of employee claims, and can cover the cost of hiring a lawyer or any resulting settlement after the underlying policy's limits were reached.
Find commercial umbrella insurance quotes for your business
What does commercial umbrella insurance not cover?
While umbrella insurance does expand coverage limits for a number of policies, it does not provide all the protection that a small business might need.
For instance, an umbrella policy does not cover:
Damages within the underlying policy limits
Umbrella liability insurance does not become active until the underlying policy has reached its limits. And as with any policy, it does not provide coverage beyond its own policy limits.
Business property damage
Business umbrella insurance can only be added to liability policies, not property insurance.
The commercial property insurance portion of a business owner's policy (BOP) or commercial package policy (CPP) can help pay for repair or replacement when your business property is damaged by fire, theft, or covered weather-related events.
Professional errors
Professional liability insurance, also called errors and omissions (E&O) insurance or malpractice insurance, can cover lawsuits over professional mistakes, including undelivered services and missed deadlines.
You can boost the limits on this policy with excess liability insurance, also called excess E&O, which is very similar to umbrella insurance.
Employee theft
Commercial crime insurance, a type of fidelity bond, is needed to financially protect your business from criminal acts committed by employees against customers or clients.
Unlike insurance, bonds only reimburse damages up to the size of the coverage that was purchased. Umbrella insurance could not be used to provide coverage beyond that limit.
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View video transcript.
Get covered cost effectively and give back to business with Insureon. Insurance isn't as expensive as you might think.
The right policies can handle lawsuits or workers comp claims saving you thousands of dollars. From general to cyber liability, your costs are based on your type of business, number of employees and location.
Insureon helps you compare policies with the best rates from A plus carriers and our expert brokers will get you covered the same day.
Start your application now, it's easy. Protection is peace of mind.
Before getting commercial umbrella insurance, it's important to find the underlying insurance policies that meet the needs of your small business.
Complete our easy online insurance application to get free small business insurance quotes today.
Other common questions about commercial umbrella insurance
How much commercial umbrella insurance do you need?
Businesses usually purchase an umbrella policy to fulfill contracts calling for limits of more than $2 million. Contracts of up to $5 million are not uncommon. In that case, an umbrella policy with a limit of $3 million would be added to a policy with a $2 million limit to meet the requirement.
Otherwise, the amount depends on your industry and your business needs. For example, you may want to secure more coverage to protect a team of construction workers.
As you compare umbrella insurance quotes and consider your options, keep these three things in mind:
- You can't buy umbrella insurance without having at least one other policy. You need to have general liability, employer’s liability, or commercial auto liability insurance before you can get umbrella coverage.
- Umbrella insurance doesn't work with commercial property insurance. While it does boost three other policies, umbrella insurance can't be used to help with business property damage.
- Umbrella insurance comes in $1 million increments. Small business owners can increase their lawsuit protection in $1 million increments, which means you can buy the exact coverage you need.
If you're unsure how much coverage you need, chat with a licensed insurance agent.
What is the difference between commercial umbrella insurance and excess liability insurance?
You may see the terms commercial umbrella insurance and excess liability insurance used interchangeably, but they’re not the same.
Excess liability insurance provides additional coverage for just one of your business liability policies, usually general liability insurance or E&O insurance.
Commercial umbrella insurance provides coverage across several liability insurance policies when there’s a claim against your business that exceeds its limits.
Where can I learn more about commercial umbrella insurance?
If you want to learn more about this policy, you can find additional answers in our frequently asked questions about commercial umbrella insurance.
If there are any additional questions you have about coverage, you can also contact an Insureon agent.
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Updated: July 6, 2023