What is umbrella liability insurance?
- Umbrella / excess liability insurance
Once a policy’s limit is reached, umbrella insurance (or excess liability insurance) provides additional funds for claims made on general liability, commercial auto, or employer’s liability insurance.
When do small businesses need umbrella liability insurance?
Umbrella liability insurance, also called excess liability insurance, boosts the coverage limits of an existing liability policy. Small businesses that purchase this policy usually need it to fulfill a contract that requests higher than standard policy limits. For example, if a client contract required a general liability policy with a $5 million limit, an umbrella policy of $4 million would be added to your existing $1 million general liability policy.
If a lawsuit ends up costing more than your liability insurance policy limit, commercial umbrella coverage frees up additional funds so you don’t end up paying out of pocket. An umbrella policy is often a cheaper option than increasing the limits on your liability insurance.
Umbrella insurance can supplement the liability coverage of:
- General liability insurance
- Employer's liability insurance (often included in workers' compensation)
- Commercial auto insurance
Before you can purchase umbrella liability insurance for any of these policies, an insurer will require you to carry at least $1 million in coverage on the underlying policy.
Businesses that need this policy:
- Need more protection and are on a budget
- Are required to carry a high liability policy limit to work with a certain client
- Have high liability risks, such as a business location with a lot of foot traffic
- Want to cover exclusions in their existing liability policies
How does umbrella liability insurance help businesses?
How does umbrella insurance protect businesses when added to employer's liability insurance?
Umbrella liability insurance costs
Umbrella insurance can cost less than increasing the limits of the underlying policy. Several factors affect policy costs, including:
- Industry and risk
- Coverage limits
- Location
- Number of employees
- Number of vehicles