Commercial Umbrella Insurance
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Commercial umbrella insurance

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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.

When do small businesses need commercial umbrella insurance?

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, commercial umbrella coverage can provide additional funds to make up the difference.

Specifically, umbrella liability insurance can supplement your coverage provided by:

Before you can purchase umbrella liability insurance for any of these policies, an insurer will require you to carry a certain amount of coverage for the underlying policy. For example, if a client contract required a general liability policy with a $5 million per-occurrence limit, an umbrella policy of $3 million would be added to your existing $2 million general liability policy.

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Businesses that buy this policy:

  • 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

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 additional protection on a claim that exceeds the limits of your primary policy, your 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.

Someone suffers a serious injury after tripping and falling at your business, and a drawn-out legal battle follows. The medical expenses, legal fees, and damages add up to $2.5 million. After hitting your general liability limit, you still have a $500,000 bill.

What happens then?

This is where an umbrella liability policy can help. This policy covers expenses that exceed your underlying policy's limit. For the case above, an umbrella policy can cover the additional $500,000.

Basically, you can make a claim on umbrella insurance when:

  1. Your business is sued over third-party bodily injury or property damage; and
  2. The cost of the lawsuit is more than the limit of the underlying insurance policy designed to cover it.
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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.

What does commercial umbrella insurance cover?

If you have any (or all) of these three policies – general liability insurance, employer’s liability insurance, or commercial auto liability insurance – commercial umbrella insurance can boost your coverage.

Commercial umbrella policies sold by Insureon have the same terms and cover the same risks as the underlying business insurance policy.

Umbrella insurance can cover:

  • Slip-and-fall injuries
  • Car accident liability
  • Employee injury lawsuits
  • Property damage lawsuits

Umbrella insurance cannot cover:

  • Business property damage
  • Damage to your own business vehicle
  • Employee theft

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, because lawsuit costs often escalate. You might consider it 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.
  • You have lots of contact with the public. The more foot traffic a business has, the greater its liability risks.
  • Your business owns many vehicles. A business with a fleet of vehicles might want coverage to protect against the cumulative costs of minor vehicle accidents.
  • Your work is hazardous. The more hazardous the work, the greater the risk of employee injury – especially in industries such as construction. Umbrella insurance added to employer's liability insurance guards against employee claims that your negligence led to an injury.

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 fleet of vehicles, or a team of construction workers. If you're unsure how much coverage you need, chat with a licensed agent.

How much does commercial umbrella insurance cost?

Businessperson calculating the cost of umbrella insurance.

This policy costs about $40 per month for each $1 million of additional coverage. Several factors affect commercial umbrella insurance costs, including:

  • Industry and risk
  • Coverage limits
  • Location
  • Number of employees
  • Number of vehicles
View Umbrella Insurance Costs

Commercial umbrella insurance is not the same as 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 errors and omissions insurance (E&O). Commercial umbrella insurance provides coverage across several liability insurance policies when there’s a claim against your business that exceeds its limits.

Three key takeaways about commercial umbrella insurance

As you compare umbrella insurance quotes and consider your options, keep these three things in mind:

  1. 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 insurance before you can get umbrella coverage.
  2. 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.
  3. 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.
Updated: June 29, 2022
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