Commercial umbrella 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.

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.

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.

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.

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.

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.