Commercial Umbrella Insurance
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What does commercial umbrella insurance cover?

Commercial umbrella insurance can increase the limit of three policies: general liability insurance, employer's liability insurance, and commercial auto liability insurance. It protects against the most expensive liability lawsuits.

Commercial umbrella insurance can provide additional coverage for:

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Third-party bodily injury
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Employee injury
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Third-party property damage
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Auto accidents

Third-party bodily injury

When you add commercial umbrella insurance (or excess liability insurance) to your general liability insurance, it can cover your legal expenses if someone injures themselves on your business’s property.

Example: A customer trips on an uneven step at your restaurant and sustains serious injuries that leave them with a chronic health problem. To recoup the cost of medical expenses, the customer decides to sue for $3 million in damages.

The restaurant's general liability policy has a per-occurrence limit of $2 million. Umbrella liability insurance would cover damages beyond the initial $2 million covered by general liability insurance, up to the umbrella policy's limits.

Third-party property damage

When you add commercial umbrella insurance to a general liability policy, it helps pay legal bills related to destroyed or damaged third-party property.

Example: A general contractor backs a company van into a client’s warehouse, destroying inventory and causing extensive damage to the building. The contractor's general liability policy covers the first $2 million in damages. An umbrella liability policy would cover any remaining legal expenses, settlement, or judgment up to the policy limit.

Employee injury

When you add commercial umbrella insurance to employer's liability insurance (typically included in workers' compensation), it helps pay for employee lawsuits over work injuries.

Example: A long-time employee at an HVAC installation company sues her employer over a chronic back injury from lifting heavy equipment. In this situation, an umbrella liability policy can cover the cost of hiring a lawyer along with the resulting settlement or court-ordered judgment. It would activate after the underlying policy's limits were reached.

Auto accidents

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.

Example: On the way to a job site, a window installer driving a company van causes a pile-up. The other drivers sue for compensation that totals more than $2 million dollars, the limit on the business's auto insurance.

In this situation, an umbrella liability policy can cover the 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.

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Commercial umbrella insurance does not cover:

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Damages within the underlying policy limits
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Employee discrimination lawsuits
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Professional errors
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Business property damage

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. Learn more about how umbrella insurance works.

Example: An IT consultant accidentally drops a client's laptop; the hard drive breaks and vital company information is lost. The client sues for $2 million in damages. The consultant's general liability policy has a limit of $2 million, so it pays for the claim. The umbrella insurance would only become active for damages beyond $2 million, up to its policy limit.

Professional errors

Professional liability insurance, also called errors and omissions insurance or malpractice insurance, can cover lawsuits over professional mistakes, including undelivered services and missed deadlines. Umbrella liability insurance cannot be added to this policy.

Example: An architect misses a deadline for creating a blueprint. Because of this, the client delays plans for construction, which is a tremendous financial setback for the company.

The client decides to sue the architect for the revenue lost because the business will open later than anticipated. The architect's professional liability insurance policy covers the legal costs and settlement.

Employee discrimination lawsuits

Employment practices liability insurance (EPLI) can cover lawsuit expenses related to claims of harassment, discrimination, and wrongful termination. Umbrella insurance cannot be added to this policy.

Example: A real estate agent files a lawsuit claiming that her agency assigns the most valuable properties to male agents. An EPLI policy could cover the real estate agency's legal expenses.

Business property damage

The commercial property insurance portion of a business owner's policy can help pay for repair or replacement when your business property is damaged by fire, theft, or covered weather-related events. Umbrella insurance can only be added to liability policies, not property insurance.

Example: A thief breaks into a medical office and steals laptops and other electronic equipment. Commercial property insurance can help pay to replace the stolen items and repair the broken window.

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