What Is Commercial Umbrella Insurance?

A commercial umbrella insurance policy provides additional protection when a claim appreciation on an underlying insurance policy such as commercial general liability insurance exceeds a liability limit. 

Let's say your firm is sued $2 million, but you have only $1.5 million in commercial liability coverage. Your commercial umbrella insurance would cover the $500,000 gap. Liability insurance covers your company s legal defense costs up to the amount of the insurance policy.

What Does Commercial Umbrella Insurance Cover? 

Commercial umbrella insurance can help protect business owners from a range of risks and costs, including loss of income due to unexpected events such as a tornado or hurricane. Some common covered risks include property damage, liability claims, and loss of profits. Many policies also offer additional coverage for equipment and inventory. 

Commercial umbrella insurance helps pay for claims that exceed the limits of an underlying insurance such as a general liability policy or a commercial auto policy.

A commercial umbrella insurance policy can cover legal expenses, medical expenses, damage to another's property, and legal judgments and settlements.

Insurance companies write commercial umbrella policies with aggregate limits that are from $1 million to $15 million.

How Does A Commercial Umbrella Insurance Policy Work?

Let's suppose that one of your employees gets into a car accident while making deliveries for work. Your employee is at fault, and the accident costs include property damage and bodily injury damage above the liability limit on your commercial auto insurance policy. Without an appropriate business umbrella policy, you would have to devote your personal funds to these expenses, leaving your business at risk. As an alternative, you can use your own funds, placing your financial security at risk. With a commercial umbrella policy, you would not need to use either option. A commercial umbrella policy would cover any liabilities above your primary liability policy's limit.

What Is Not Covered By Commercial Umbrella Insurance?

There are a few claims that aren't covered by commercial umbrella insurance. For example, a commercial property insurance policy isn't going to qualify for inclusion in a commercial umbrella insurance policy.

Let's assume that an office facility equipment fire damages business. In this case, you would need to pay for your expenses with your commercial insurance plan without the assistance of a commercial umbrella insurance policy.

Who Should Buy Commercial Umbrella Insurance?

Generally speaking, the more your company comes into contact with customers or clients, the greater your liability risk. And that may be increased significantly if your employees use heavy or dangerous equipment during their work. Both of these kinds of businesses are advised to consider extending their liability limits with commercial umbrella insurance.

Other scenarios involve working in the industry or on someone else's business property. If your business is business hours, you increase the danger for personal injury claims. Working at someone else's property presents hazards for property damage. These are both reasons to obtain some extra protection with a commercial umbrella liability insurance policy.

What’s the Cost of Commercial Umbrella Insurance?

Commercial umbrella insurance costs between $40 and $50 per month for each $1 million of additional coverage, based on Insureon. Coverage amount and the level of risk of the business determine how much an commercial umbrella policy will cost.

Many small firms (17%) pay less than $500 a year for a commercial umbrella policy and 36% pay between $500 and $1,000 annually, according to Insureon.

Paying the full cost of your commercial umbrella policy before you receive it is a good way to save money if you pay monthly premiums. Making monthly payments may be convenient, though you pay higher pricing overall annually. If you have the money, paying your entire insurance bill upfront may be ideal.

When Can You Add Commercial Umbrella Insurance?

The kinds of liability insurance that can benefit from additional layer of commercial umbrella insurance include general liability insurance, commercial auto insurance, hired and non-owned auto insurance, and employer's liability insurance.

What’s the Difference Between Commercial Umbrella Insurance and Excess Liability Insurance?

One's excess liability insurance may cause another liability policy to take over. Similar to commercial umbrella insurance, an excess liability insurance plan provides additional coverage if an underlying insurance coverage has reached its total liability limit.

An additional liability insurance policy merely provides additional liability insurance to a vehicle insurance policy. There exists a commercial umbrella insurance covers multiple excess liability insurance policies.