Commercial Umbrella Insurance
The Coverage Upgrade You Need
What happens when an incident occurs and your insurance limits aren’t enough to cover all of the costs? Umbrella insurance is there to help you out.
Commercial umbrella insurance provides additional liability protection over the coverage limits of existing primary policies. When the cost of claims exceeds the policy limits, an umbrella insurance policy adds an extra layer of coverage. Furthermore, umbrella insurance also covers additional expenses, including legal costs, medical payments, and property damage costs.
Commercial umbrella liability and excess liability are two separate lines of insurance that have a similar purpose. These policies can be purchased only if you have already secured one or more primary insurance policies for your business.
As a business owner, you can only purchase umbrella insurance once you already have specific primary policies. Some of the most common primary polices that umbrella insurance applies to are:
- General liability insurance
- Commercial auto insurance
- Employers’ liability (part of workers compensation insurance)
In this article
- Why Do Businesses Need an Umbrella Liability Policy?
- Commercial Umbrella Liability vs. Excess Liability Insurance
- What Does Commercial Umbrella Insurance Cover?
- What Does Commercial Umbrella Insurance Not Cover?
- Types of Insurance That Include Commercial Umbrella Insurance
- How Much Does Commercial Umbrella Insurance Cost?
- Frequently Asked Questions
Why Do Businesses Need an Umbrella Liability Policy?
According to Globe Newswire, in 2020 U.S. bankruptcy filings have gone up by 52% in comparison to July 2019. Having a commercial umbrella insurance policy as a backup for your business certainly protects you from potential worst-case scenarios that can lead to bankruptcy.
For example, suppose your company is facing two lawsuits. One of them is a $3 million claim for property damage. The other claim is also a $3 million lawsuit from your employee for an injury due to company negligence.
Your primary liability policy for general liability and employee liability has a limit of $2 million each. Thus, having a commercial umbrella insurance policy in this situation will cover the $2 million left uncovered by your primary insurance.
Commercial Umbrella Liability vs. Excess Liability Insurance
People use commercial umbrella liability and excess liability insurance interchangeably, but they are different. Both these policies have a similar purpose — extending the limits of standard liability coverage. But the kind of coverage they provide is what differentiates them.
One of the main differences between umbrella liability and excess liability is that umbrella coverage can be applied to multiple policies whereas excess liability cannot. Additionally, umbrella liability provides coverage for claims that are not included in the primary policy. But excess liability is restricted to coverages included in the main policy.
Get personalized commercial umbrella insurance quotes from our wide range of carriers today!
What Does Commercial Umbrella Insurance Cover?
Umbrella insurance provides additional protection for the following policies:
- Commercial general liability insurance (CGLI): A CGLI policy protects the business against third-party liability claims for property damage, bodily injury, and reputational harm. Businesses can often face third-party claims which can threaten the future of the business when the claims exceed the standard CGLI limit of $1 million. So, an umbrella policy can increase the limits of your CGLI coverage.
- Workers compensation insurance: Workers compensation insurance protects your business and your employees from on-the-job injuries. The coverage pays for the medical bills, lost wages, rehabilitation costs, and death benefits incurred due to any unfortunate events in the workplace. In certain situations, employees may file a lawsuit claiming that an injury happened due to their employer’s negligence. Employers are safe from these claims if their workers’ compensation policy has employer liability coverage. However, if the claim amount exceeds the limits of the coverage, then umbrella insurance can cover the liability risk. You can purchase the umbrella policy to receive the extra coverage as well as cover litigation costs.
- Commercial auto insurance: Commercial auto insurance protects your business from third party claims due to accidents. An umbrella policy gives additional support to the auto policy. For example, if your commercial auto policy has a liability limit of $300,000, you can get extra coverage from your umbrella policy if a claim exceeds that limit.
What Does Commercial Umbrella Insurance Not Cover?
Commercial umbrella insurance coverage will not provide coverage for claims if your business does not have an existing primary insurance policy in place. People might think that an umbrella insurance policy will cover anything. But it isn’t so. A standard umbrella coverage has the following exclusions:
- Commercial property insurance: An umbrella insurance policy does not cover claims associated with commercial property insurance, including damaged office inventory and equipment on your business’s premises.
- Errors and omissions insurance: Errors and omissions insurance is a type of professional liability insurance that protects professionals from the consequences of their mistakes damaging a third party. An umbrella policy excludes claims for professional errors and acts of negligence that are involved with doing business.
- Lawsuits related to employee discrimination: An umbrella insurance policy does not cover claims and lawsuits associated with employer discriminatory behavior. This is covered by employment practices liability insurance.
- Punitive damages: An umbrella policy will not provide any coverage if the court decides to punish a business that has done intentional harm to another person or company. Such damages are not covered by insurance and must be paid by the involved party.
- Claims already covered by primary policies: Umbrella insurance is not the first line of defense in loss cases. For the policy to take effect, your primary plan should exhaust its coverage limits.
Types of Insurance That Include Commercial Umbrella Insurance
An umbrella policy is included for the following business packages:
- Lawyers insurance
- Accounting insurance
- Farm insurance
- Entertainment insurance
- Food business insurance
- Restaurant insurance
- Photography insurance
- Nonprofit insurance
- Gas station insurance
- Landscaping insurance
- Contractors insurance
- Consultant insurance
- Hotel insurance
- Engineer insurance
- Handyman insurance
How Much Does Commercial Umbrella Insurance Cost?
The cost of an umbrella policy depends on the needs of your business. These needs will decide the amount of coverage you require. The following factors affect the cost of an umbrella policy:
- Company Size: Larger companies tend to have more expensive umbrella insurance costs in comparison to smaller companies. Therefore, large companies should extend their coverage limits since they have greater exposure to financial losses.
- Employee Number: The higher the number of employees, the higher the exposure to workplace accidents such as slips, falls, or injuries from operating equipment. These accidents can lead to possible lawsuits and that is when you will need more limits on your employers’ liability coverage. This will result in a larger premium.
- Type of Industry: Businesses that have high risks usually have a higher rate of coverage costs. Some examples are businesses in construction and healthcare.
- Claims History: The insurance policy’s cost goes up if your business does not have a good track record with previous claims.
- Insurance Carrier: Different insurance carriers provide you with an array of options that can be of varying costs. Comparing policies from different carriers and finding a personalized quote for yourself is an effective method.
Think you need a personalized umbrella insurance quote? Contact us to get one from a wide range of carriers.
Is it mandatory to purchase a commercial umbrella or excess liability insurance policy?
It is not mandatory to purchase an umbrella or excess liability insurance policy. However, there may arise a situation where your business will require you to have a commercial umbrella policy. For example, if your business deals with government contracts, you will need such coverages as per their contractual requirements.
Does my business need an umbrella insurance policy?
If your business regularly operates in a high-risk industry such as construction, healthcare, or manufacturing, you might want to consider purchasing an umbrella insurance policy. Purchasing an umbrella policy can seem like an unnecessary expense for some business owners. But if a lawsuit can put the future of your business at stake, then it might be wise to consider purchasing an umbrella policy.
How much umbrella insurance do I need?
It is advisable to get an umbrella policy that at least covers the net worth of your business. The coverage you require depends upon the size of your business, the number of employees, and the type of business.
How do I buy a commercial umbrella insurance policy for my business?
A commercial umbrella insurance policy requires a detailed assessment of risks as it differs depending on the nature of the business. To get the best umbrella policy for your business, it is best to have an expert evaluate all of your risks, coverages and carrier options.
Contact us today for a free personalized umbrella insurance quote.
Contact us today for a free personalized umbrella insurance quote.