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What is commercial umbrella insurance?

Commercial umbrella insurance (also known as business umbrella insurance, excess liability insurance or umbrella liability insurance) is a form of liability insurance that supplements an underlying policy, such as a general liability or commercial auto insurance, and provides an extra layer of protection for your business.

 

It can only be purchased as a supplement, not as a replacement for a standard liability policy.

Who Needs It?

Any business with a high level of exposure should consider a commercial umbrella policy. Exposure includes businesses that:

 

  • own substantial assets that need protection in the event of a claim or lawsuit.
  • have a high risk of employee injury.
  • have high net-worth clients.
  • own or rent a space that is open to the public or their clients.
  • require travel, make deliveries or do a lot of driving, as auto accidents are a common source of liability claims.

What’s Covered?

Umbrella liability policies serve two main purposes:

 

  1. Picks up the slack of an underlying policy when the aggregate limit has been surpassed by claim payments.
  2. Provides protection against claims that aren’t covered in the underlying policies in the first place.

 

What is covered by your umbrella policy depends on what insurance you are extending. In general, the same claims will be covered under the umbrella policy that are covered in your policy; it’s simply a matter of the policy limit that changes.

How much do I need?

Umbrella insurance is generally sold in increments of $1 million. How much you decide to purchase depends on the amount of risk-exposure in your business.

 

A small retail shop selling cell phone accessories that has high traffic but relatively low risk may want to invest in some umbrella insurance. However, a general contractor that handles large projects and employees many subcontractors should almost certainly invest in at least a few million in umbrella insurance.

 

The right agent can help you figure out what’s best for you.

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