Business Umbrella Insurance
What Is Business Umbrella Insurance?
Commercial umbrella insurance is a policy that provides additional layers of liability coverage above other small business insurance liability policies, like your general liability, auto liability, or professional liability.
What Does Commercial Umbrella Insurance Cover?
Commercial umbrella insurance, or business umbrella insurance, typically applies to third-party claims or lawsuits involving:
- Bodily injury
- Property damage
- Some personal and advertising injuries
Business umbrella insurance can also provide liability protection over multiple underlying policies, like general liability, professional liability, or commercial auto liability. It isn’t restricted to only one type of coverage.
What Does Commercial Umbrella Insurance Not Cover?
Umbrella insurance typically doesn’t cover:
- Employee injuries
- Intentional or fraudulent acts
- Damage to your own property or gear
- Exclusions that apply to the underlying policies
Keep underlying policies active at required limits, then use an umbrella to satisfy higher contract requirements or protect against rare, high-severity losses that could overwhelm your base policies.
How Does Umbrella Insurance Work?
When it rains, sometimes a rain jacket just isn’t enough. So, you use an umbrella. Umbrella insurance is similar — it goes on “top” of your primary liability policies.
When a covered claim maxes out your original limits, your umbrella coverage can step in to pay the remaining costs, as long as they don’t go over its own limit. You must maintain any required underlying limits and active policies for it to work.
Umbrella insurance typically mirrors what the underlying policies cover and exclude. Sometimes it may be able to cover claims the original policy doesn’t, but it depends on the specific umbrella policy language.
Most commercial umbrella policies only increase the dollar amount of your coverage limits, and don’t expand coverage to new or different kinds of losses.
What Are Common Examples of How Umbrella Insurance Works?
Slip-and-fall: A customer is seriously hurt after a slip and fall on your property. The full settlement amount is $2.5 million, but your general liability can only pay a $1 million limit. Business umbrella insurance can cover the extra $1.5 million, as long as it doesn’t exceed the umbrella’s policy limit.
Contract requirement: A venue requires you to carry $5 million liability insurance, but your general liability policy caps out at $1 million. You buy a $4 million umbrella policy to make up the difference.
At-fault auto crash: An employee on a coffee run totals another car with injuries. Your commercial auto insurance policy hits its cap. Umbrella kicks in for the rest.
Business Umbrella vs Excess Liability: What’s the Difference?
Umbrella and excess liability coverage are similar, but not the same. Umbrella insurance often costs more than excess liability, primarily because it generally provides more overall coverage.
Commercial umbrella insurance: Provides additional coverage limits, applies to multiple underlying coverages, and may offer broader protection (policy-dependent).
Excess liability insurance: Provides additional coverage limits for only one specific underlying coverage.
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