Commercial general insurance provides businesses with additional liability coverage when claims exceed the limits of
specific primary insurance policies, such as public liability or commercial auto. Most umbrella policies provide an additional $1 million in coverage. The cost of business umbrella insurance varies, but most small businesses get between $500 and $1,500 in annual coverage.
How commercial umbrella insurance works
Commercial umbrella insurance is a policy that increases coverage limits over other policies and is only used if necessary. A commercial umbrella policy is only used on insurance claims if the procedures under it can no longer protect the risk, meaning they have used all of the allowable protections and liability exposure still exists.
For example, the commercial umbrella policy may have general liability, commercial auto, and workers’ compensation policies under it. If a company box truck with $250,000 liability coverage is responsible for a 10-car crash on an icy road, damages could be $800,000. The business auto covers the first $250,000 up to your policy limits, and then the umbrella kicks in to pay the rest.
General insurance against excess coverage
While many people will use the terms umbrella and excess coverage interchangeably, they represent different ways to increase risk protection. Umbrella coverage increases the range of designated liability policies and broadens it. For example, an umbrella policy may extend the geographic region where policyholders are offered protection.
Excess coverage only increases the underlying limits without additional, comprehensive coverage. In some cases, extra coverage is more restrictive than existing underlying limits, such as limiting the conditions under which a claim is covered.
Who Is Commercial Umbrella Insurance Right For?
Any business with liability risk can benefit from having a commercial umbrella policy. Small business owners who interact directly with the public on their business property or the property of a third party should assess their need for blanket coverage. Certain business operations increase the chances of lawsuits or high demands.
Typical scenarios where commercial umbrella insurance is needed include:
- Commercial property is open to the public: Any business with foot traffic has significant risk exposure than standard commercial general liability limits may not be enough to cover. For example, restaurants may have wet floors that customers slip-on.
- Business Conducted on Customers’ Property: Service providers, such as plumbers, handypersons, or building contractors, do most of their work on other people’s property, increasing the risk of bodily injury to others or significant property damage.
- Employees use their cars for business: Businesses like life insurance that require representatives or employees to use their vehicles for work purposes can increase the risk of at-fault accidents.
- Clients Require High Coverage Requirements: Contract work where clients require higher coverage limits than in one or more insurance policies.
The most important factors driving the need for commercial umbrella insurance are the type of industry and exposure to the public. For example, construction contractors work primarily on someone else’s property and often use dangerous machinery. These factors increase your risk of third-party liability claims, such as bodily injury or property damage and your need for blanket coverage.
Characteristics of commercial umbrella insurance
Commercial umbrella insurance pays claims that exceed the coverage liability limits of other policies. This means that the umbrella policy pays up to your limits first, and the umbrella coverage adds when needed. Small business insurance policies covered by general business insurance include public liability, commercial auto insurance, workers’ compensation, and product liability coverage.
Insurance companies write these policies considering all the small business insurance under the umbrella, including policies held with outside companies. All eligible underlying policies are covered once you have a commercial umbrella policy. Small business owners cannot exclude a policy like workers’ compensation; all procedures are automatically covered once the umbrella is in force.
What does commercial umbrella insurance cover?
Commercial umbrella insurance adds coverage to most existing commercial insurance policies with liability components. Adds additional coverage to the liability components of those policies that kick in when the underlying policy meets its coverage limits. An umbrella is often the most cost-effective way to obtain more liability coverage across multiple policies.
Excess claims on commercial liability insurance
A general commercial liability (CGL) policy covers third-party liability for bodily injury, property damage, advertising, and personal injury. Public liability claims often occur after a slip and falls or similar incidents that result in bodily injury or property damage. Claims can be expensive and create substantial financial exposure for businesses. Commercial umbrella insurance adds coverage to these liability limits.
Most of your exposure to third-party risk is increased when your customers do business with you on your premises. For example, your clients’ bodily injury or property damage can potentially become an expensive lawsuit that can drive the cost of claims above the standard CGL limit of $1 million. To protect yourself against this risk, general insurance is necessary.
Excess Workers’ Compensation Claims
Workers’ compensation insurance pays for medical care, rehabilitation services, and lost wages for employees injured while on the job. In some cases, employee claims may require expanded general business insurance coverage. Commercial umbrella insurance extends the range to help cover claims that exceed coverage and defenses to lawsuits arising from workers’ compensation claims.
Excess Claims in Commercial Auto Insurance
Commercial auto insurance has several components that cover liability for at-fault accidents and protect the insured vehicle. A general commercial policy provides additional protection to the liability portion of the commercial auto policy. A commercial auto policy with $250,000 in liability limits gets the extra coverage of the umbrella policy.
