How to Know if You Need Commercial Umbrella Coverage

The fact of the matter is that regardless of how much you plan or the amount of money you invest in security, safety, and prevention measures, accidents are bound to happen. And when they do, you need to ensure you have adequate coverage for otherwise catastrophic medical and legal expenses. 

In this article, I’ll outline what you need to know about business umbrella coverage, how much it costs, and which companies might benefit the most. Let’s begin with the basics. 

What are the Principles Behind Umbrella Coverage for Your Business? 

A commercial umbrella policy is designed to extend limits above and beyond those provided by your general business liability, commercial auto insurance, and worker’s compensation policies—generally somewhere between $1 million and $15 million in total coverage. 

In other words, once your underlying liability and auto limits are exhausted, a commercial umbrella policy kicks in and provides excess coverage against liability claims like: 

• Libel 
• Reputational damage 
• Auto accidents, including damages caused by vehicles used but not owned by your business 
• Product liability 
• Bodily injury and property damage 
• Legal costs, including judgments and settlements 
• Someone else’s belongings 

Despite these essential coverages, it’s important to note that most carriers require you carry underlying commercial GL and auto policies to qualify for an umbrella. And if these commercial policies lapse before a claim occurs, you could be responsible for paying their limits out of pocket before your business umbrella policy kicks in. 

Are There Any Scenarios Where a Commercial Umbrella Policy Excludes Coverage? 

The coverage, exclusions, and conditions that apply to your underlying general liability, commercial auto, and worker’s compensation policies will also apply to your business umbrella policy. 

Furthermore, while a commercial umbrella policy extends coverage above and beyond your general business liability, commercial auto, and worker’s compensation insurance, it isn’t designed to expand your commercial property insurance limits. 

Related: How Commercial Property Insurance Works 

For example, if a power surge damages your business’s equipment and forces you to close for a short time, this is a scenario where a business umbrella policy would not kick in. Instead, this is where you’d need commercial equipment breakdown coverage, which is an optional endorsement typically found under a business owner policy. 

Commercial umbrella policies also don’t cover errors and omissions (E&O) claims. 

What’s the Difference Between a Personal Umbrella and a Business Umbrella Policy? 

Fundamentally, commercial and personal umbrella policies are more alike than dissimilar since they both extend coverage beyond their underlying policies. 

However, there are several important distinctions. For example, a commercial umbrella policy is intended to insure against business-related exposures, including its premises and operations. But personal policies cover personal exposures, such as houses, vehicles, ATVs, snowmobiles, and RVs. 

Related: How Does Umbrella Insurance Work? 

Another big difference is the limits. Personal umbrella policies typically offer between $ and $ million in coverage, while commercial umbrella coverage can reach $ or more. 

Here’s a quick table you can reference that outlines these differences: 

How Much Does a Commercial Umbrella Policy Cost? 

An annual commercial umbrella policy with $1 million limits could cost you as little as a few hundred dollars. From there, factors that could increase your costs include:  

• The limits you choose 
• The industry in which your business operates 
• Your company’s size and scope 
• Previous losses (especially any related to excess commercial policies) 

Remember that some carriers require that you carry underlying GL and business auto with them before offering commercial umbrella coverage, which could increase your overall cost requirements, while others do not. 

Which Companies Could Benefit from Business Umbrella Insurance Coverage? 

Accidents can always happen, so just about any business could benefit by carrying excess liability coverage. 

With this said, the more personal interaction you have with your customers, or the heavier machinery you use, the higher your liability exposure and the greater need you’ll have for a business umbrella policy. 

Suppose you or your employees frequently work offsite on someone else’s property, allow the public onto your property during business hours, or believe a claim could potentially exceed your underlying liability limits. In that case, a commercial umbrella policy could also be ideal.  

Give the professionals at IHS Insurance Group a call, and we’ll help you figure it out! 

Where Can You Get a Commercial Umbrella Policy for Your Business? 

Although excess coverage can be an excellent idea for your business, it’s vital to remain within your budget while minimizing your excess exposures. The great news is that the IHS Insurance Group professionals boast decades of combined experience helping clients like you accomplish precisely that! 

Do you need a FREE Quote or have questions regarding commercial insurance? Please fill out our quick GET A FREE QUOTE form, and an agent will get back to you at your convenience! 

We look forward to speaking with you today!