Commercial Umbrella Insurance

Embroker helps you get the right umbrella insurance to sit on top of other insurance policies. Should the underlying insurance policy limits become exhausted, this policy kicks in as additional liability protection.

Commercial Umbrella insurance is a type of coverage that is designed to sit on top of other insurance policies your business holds, hence the name. Should the underlying insurance policy limits become exhausted, the umbrella kicks in as additional liability protection.

Umbrella coverage is designed to set on top of commercial general liability (CGL), auto (or hired and non-owned Auto), workers’ compensation, employee benefits liability, and often provides umbrella protection over several locations and properties.

We wrote this guide to help you, the reader, understand both the basics of commercial umbrella insurance as well as some more advanced considerations. Our hope is that you walk away from this article a more empowered buyer, with a better understanding of the risk you can transfer to other parties via the commercial umbrella product.

If you’d like help, we’d invite you to talk with a broker or get started by creating an Embroker account. Our highly experienced insurance experts will work with you to gain a deep understanding of your unique needs before negotiating a customized policy on your behalf. For more clarity on pricing, your business will be benchmarked against similar businesses to identify any unforeseen exposures and premium savings opportunities.

What Is Umbrella Liability Insurance?

Virtually any business can benefit from holding the excess liability coverage that an umbrella policy provides. Accidents happen, and there’s always a chance of encountering a lawsuit that exceeds policy limits for your existing liability coverage.

With that said, you need to evaluate your budget (and other factors) to determine whether commercial umbrella insurance is a worthwhile investment for your company. In essence, this type of coverage is a form of risk management, so you need to assess your level of liability risk.

For example, a business employing a fleet of delivery drivers has higher liability risk than a company whose employees all work in an office. Having drivers on the road increases your company’s risk of being held liable for accidents; risks which added liability insurance could help cover.

Also, there may be certain contractual situations that require your business to hold commercial umbrella insurance. If your business has a government contract, for instance, the contract will likely mandate that you carry this type of coverage.

Who Needs Umbrella Liability Insurance?

Any business that is potentially at risk of exceeding the limits of their existing liability policies should consider commercial umbrella insurance.

Businesses that have commercial property that is open to the public should be considering this type of insurance since the fact that they are working directly with people exposes them to an increased amount of risk.

If your company does business on other people’s property, you also fall into the group of business that might need more coverage than their general liability policy provides if something happens to go wrong, since there is a great chance of third-person injury and property damage.

Basically, your industry type and your company’s level of exposure to the public are the two main factors that drive the need for commercial umbrella insurance. The greater the risk of third-party liability claims, the greater the need for umbrella coverage.

Why Do Businesses Need Umbrella Liability Insurance?

No matter how much you put into safety and prevention at your company, accidents will always happen. There is no way to completely cover yourself and avoid risk with prevention alone. There are always going to be freak accidents and incidents that are completely out of your control.

When unexpected accidents do happen, you need to be protected. Not being prepared with coverage that’s going to cover medical and legal expenses can be catastrophic. Most growing businesses might not have the capital to recover from a crushing lawsuit without being covered.

Having commercial umbrella insurance is the right risk management strategy for any business that is serious about success and staying afloat. It’s all about being ready for the unexpected and having a fail-safe in place in the form of insurance coverage that is going to protect you in these worst-case scenarios.

What Does Umbrella Liability Insurance Cover?

The point of a commercial umbrella policy is to provide coverage when your claims exceed policy limits for your business’s general liability and other coverages. A commercial umbrella policy increases your liability coverage to provide extra payouts that help you cover substantial claims.

This type of insurance can feasibly protect your company from any liability claim, including

Libel
Reputational damage
Vehicular accidents
Product liability
Customer injury

The point of a commercial umbrella policy is to provide coverage when your claims exceed policy limits for your business’s general liability and other coverages. A commercial umbrella policy increases your liability coverage to provide extra payouts that help you cover substantial claims.

This type of insurance can feasibly protect your company from any liability claim, including libel, reputational damage, vehicular accidents, product liability, or customer injury. Umbrella extends the underlying coverage, usually on a “follow form” basis; it’s going to pick up anything that won’t be covered by the underlying.

An umbrella policy can sit on top of the general liability, the commercial auto, and workers’ compensation insurance. It also provides an extra layer of coverage help for excess claims on hired commercial auto insurance. This means that umbrella insurance will cover damages caused by cars that your business is using but does not own.

What Doesn’t Umbrella Liability Insurance Cover?

One of the greatest misconceptions about commercial umbrella insurance is that it will cover anything that any of your insurance policies cannot cover fully. If you don’t have the right underlying policy in place, umbrella coverage will do you no good.

You cannot expect commercial umbrella insurance to cover automotive liabilities if you do not have a commercial auto policy in the first place.

Even if you do have certain types of insurance policies, there are still some instances in which commercial umbrella insurance might not give you the protection you need.

For example, umbrella insurance will not cover any property insurance claims, whether you have commercial property insurance or not. The same goes for Errors and Omissions (E&O) insurance. Umbrella insurance will not cover any claims related to this type of policy.

How Does Umbrella Liability Insurance Work?

To understand how commercial umbrella insurance works, consider this delivery driver scenario. Say you have a fleet of delivery drivers on the road and one of them makes a mistake on the road that causes a multi-vehicle accident. Your driver is found to be at fault for the accident. Multiple other drivers and their passengers were injured because of the collision, and file claims on your commercial hired and non-owned auto (HNOA) Insurance policy. Your policy has a maximum bodily injury limit of $250,000, but your claims total $350,000.

With only your policy in place, the claims exceed policy limits by $100,000 — potentially leaving your business liable to cover those expenditures. With the additional liability coverage of an umbrella policy, though, you have a safety net in place. Your commercial auto insurance policy still covers the first $250,000 in claims, but your umbrella policy covers the remaining $100,000.

Umbrella coverage saves your business from a significant in-house expense, protecting your assets and perhaps even rescuing you from a bankruptcy situation.

Highly-Publicized Example of Commercial Umbrella Insurance at Work
  • Chemical manufacturer Vanderbilt has faced numerous suits throughout alleging that talc mined and sold by the company contained asbestos and caused asbestos-related diseases in workers and others exposed to the talc. The case pitted Vanderbilt against more than 20 general liability and umbrella and excess liability insurers who had insured Vanderbilt over a 60-year period dating back to 1948.
    See: Talc maker wins asbestos coverage under occurrence policy, loses on exclusion

Commercial Umbrella Insurance Costs

As with any other type of insurance policy, umbrella insurance fluctuates in cost depending on the specifics of your policy. In particular, how much excess liability you decide to buy will be a major determining factor in how much you can expect to spend.

You need to assess your risk along with the

Size of your company
Net worth
How many employees you have
and more.

In most cases, umbrella policy limits start at $1 million and go up from there. If you need $4 million in excess liability coverage, you’re obviously going to pay considerably more than you would for the minimum $1 million of coverage.

The amount of coverage you get is the primary factor in determining the cost of your policy, but also note that your industry may play a role. Insurance companies charge more for extra liability insurance in industries they deem to be high-risk, such as healthcare. Demand for coverage in these industries also tends to be higher than in lower-risk sectors, which can also help explain the higher coverage rates.

Construction companies, for example, usually pay very high premiums usually. This is because they are working on property that is owned by someone else, which greatly increases the risk of third-party liability claims. Obviously, the bigger the construction company, the higher the cost of umbrella insurance will be. Therefore, it can be assumed to while industry determines whether you will pay a lot for umbrella insurance, the actual size of your company and scope of your work is what drives the cost.

Getting Started

Now that you have a better understanding of commercial umbrella insurance, you may be wondering how all of this affects your business and where to go from here. If you need more help or information you can reach out to our team of expert brokers. If you prefer to get started on intelligent quotes, you can get started by creating an Embroker account today.

Having a quality commercial umbrella insurance policy in place and a broker who can help you navigate the terms and conditions, as well as the claims process, can save you money and, more importantly, time.

Embroker is the easiest way to intelligently insure any business. We’re here to help!