Commercial umbrella insurance

Business owners who purchase commercial umbrella insurance usually need it to fulfill a contract that requests higher than standard policy limits offered by an insurance company.

Umbrella insurance provides additional liability coverage for the most expensive lawsuits. For example, if a major accident maxes out your general liability policy but you still owe money for damages, business umbrella insurance can supply funds to make up the difference.

An umbrella insurance policy can supplement coverage provided by:

• General liability insurance
• Employer's liability insurance (often included in workers' compensation insurance)
• 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 insurance, however, an insurer will require you to carry a certain amount of coverage for the underlying policy.

Commercial umbrella insurance policies often 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:

Think of commercial umbrella insurance coverage as a safety net. Your other liability policies are your first line of defense.

When you need an extra layer of protection on a claim that exceeds the limits of your primary policy, your business umbrella insurance can pick up the slack.

A big claim, such as an accident that injures multiple people, could easily max out your policy and leave you paying costs out of pocket. An umbrella policy is an affordable insurance solution that can give you the peace of mind and security you need.

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 for claims from a single incident.

If a client suffers a permanent injury after tripping on a broken step at your office, the medical bills, 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.

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 the following occurs:

• Your business is sued over a bodily injury or property damage.
• The cost of the lawsuit exceeds the limit of your underlying policy.

Commercial umbrella insurance used to be a policy that only big businesses bought. These days, small business owners often invest in umbrella insurance due to the rising cost of lawsuits and medical expenses.

You should consider an umbrella liability policy if:

Umbrella coverage helps close the gap on contract requirements for higher limits, typically more than $2 million.

For example, if a general contractor is bidding on a project and the contract requires a general liability policy with a $5 million per-occurrence limit, an umbrella policy of $3 million could 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 uneven flooring 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 umbrella coverage to protect against the cumulative costs of minor vehicle accidents or a large multi-vehicle accident.

For example, if a window installer driving a company van to a jobsite accidentally causes a pile-up, the other drivers could decide to sue for damages.

An umbrella policy would 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 might sue their employer over a chronic back injury caused by repeatedly lifting heavy equipment without assistance.

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 are reached.

While umbrella insurance expands 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 generally won't cover the following exclusions:

If you want to learn more about this policy, you can review our frequently asked questions about commercial umbrella insurance.

For any other questions about coverage, you can contact an Insureon agent.