HOW DOES COMMERCIAL UMBRELLA INSURANCE WORK?

Commercial umbrella insurance is designed to provide additional protection when claims are made against your firm that exceed your other liability coverage limits. While a commercial umbrella won’t extend the limits of every type of policy, such as commercial property insurance, it can be exceedingly valuable in the event of a significant loss. Without it, an unanticipated claim could prove catastrophic. 

Let’s dig into how commercial umbrella insurance works, address the limits generally offered and how much it costs, and when it’s wise to consider adding it to your coverage portfolio.

What Is Commercial Umbrella Insurance?

When a claim exceeds the limits of your firm’s commercial liability policies – including general liability insurance, commercial auto liability insurance, hired and non-owned auto insurance, employer’s liability insurance – a commercial umbrella policy can make up the difference. A typical umbrella includes:

• Property damage 
• Medical bills
• Judgments and settlements
• Legal costs

How Does Commercial Umbrella Insurance Work?

Commercial umbrella insurance sits on top of your other commercial liability policies, inactive unless it’s needed. 

Let’s consider a hypothetical scenario – a customer trips and falls on your property, causing serious injury that keeps them from working for an extended period. They sue your company for $1.2 million. Your general liability policy covers up to $1 million and, fortunately, you have commercial umbrella insurance, which steps in to cover the remaining $200,000.   

You need general liability insurance in order to obtain commercial umbrella insurance. Note, too, that you must have the correct foundational liability insurance in order for the relevant coverage to kick in. For instance, you need commercial auto liability insurance for auto-related incidents to be covered.

Commercial Umbrella Insurance Limits & Cost

Insurance companies typically write commercial umbrella insurance policies in $1 million increments, with aggregate limits that range from $1 million to $15 million. 

The cost of commercial umbrella insurance will vary on the amount of coverage, the industry you’re in, and your claims history, but it tends to be affordable. Policies typically range from $40 to $75 per month for small businesses. 

Who Should Have Commercial Umbrella Insurance?

Companies that are high-risk by nature, such as construction, transportation, manufacturing, and tree maintenance, are advised to carry commercial umbrella insurance. Given the general affordability of an umbrella policy (and how litigious our society tends to be), many less high-risk businesses choose to opt into commercial umbrella insurance. 

As a rule of thumb, you should consider an umbrella if your: 

• Business is open to the public
• Employees interact with customers
• Employees drive as part of their job
• Employees work offsite
• Employees access clients’ property
• Products are considered dangerous
• Business features heavy machinery
• Employees operate heavy machinery

If all of your employees work in an office building that’s not open to the public or, perhaps more relevant currently – all work remotely – your company may not be a candidate for commercial umbrella insurance. 

To learn more about commercial umbrella insurance and see if a policy is right for your business, connect with Independent Insurance Associates. We stand ready to support your every insurance need.