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.

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

Umbrella liability insurance can supplement your coverage provided by:

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

Commercial umbrella insurance policies 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 added layer of protection on a claim that exceeds the limits of your primary policy, your business umbrella insurance can pick up the slack.

No matter your type of business, you may need extra protection from your risk exposures. The higher limits offered by an umbrella policy are one of the most affordable insurance solutions available to give you the peace of mind 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 toward your legal expenses.

If a client suffers a serious injury after tripping and falling at your business and decides to sue, 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 each of the following occurs:

• Your business is sued over third-party bodily injury or property damage.
• The cost of the lawsuit is more than the limit of the underlying coverage.

Commercial umbrella insurance used to be a policy that only big businesses bought. These days, more small businesses invest in commercial 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 over $2 million.

For example, if a general contractor is bidding for a project and the client contract requires 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 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 sues her employer over a chronic back injury she receives 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 are reached.

While umbrella insurance does expand 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 doesn't cover the following exclusions:

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 E&O insurance.

Commercial umbrella insurance provides coverage across several liability insurance policies when there’s a claim against your business that exceeds its limits.

If you want to learn more about this policy, you can find additional answers in our frequently asked questions about commercial umbrella insurance.

If there are any additional questions you have about coverage, you can also contact an Insureon agent.