Understanding the Benefits of Commercial Umbrella Insurance
Commercial umbrella coverage is one policy option for business owners. This type of coverage can complement other liability coverages and protect companies from broader risks. Understanding these policies and how you can leverage them according to your risk levels can provide peace of mind.
What Is Commercial Umbrella Insurance? How Does It Work?
A commercial umbrella policy acts as an extra layer of liability protection, and it is added to existing liability insurance. When you reach your standard policies’ limits, umbrella coverage goes into effect. It acts as an “umbrella” over your other liability coverages to protect you from additional costs.
Coverages like general liability can offer certain protections, but these policies have limits. When your company faces risks more significant than these coverage limits, an umbrella policy will extend that protection.
Typically, businesses can benefit from an umbrella policy if the total value of their assets exceeds their general liability coverage limits. Another consideration as to whether you need umbrella coverage is your risk of getting sued. Your company’s risk for lawsuits can depend on the nature of your work and your client base.
Some businesses may need an umbrella policy more than others. For example, an online clothing store may face less risk than a retailer with one or more physical locations. If these locations experience high foot traffic, the likelihood that someone could get hurt on the property is higher. Risk levels increase in more dangerous industries, such as manufacturers who work with hazardous materials.
Consider an incident when a customer is injured at your business’s property. Your general liability policy will cover the costs of the medical expenses and legal fees associated with the injury until its limit. If your general liability policy covers up to $1 million per occurrence, but the accident results in $3.5 million in damages, your umbrella policy will cover the additional $2.5 million, provided you pay this much for coverage. Exploring alternatives to traditional casualty programs? Learn how group captives can help stabilize your long‑term cost of risk.
Liability Coverage for Management
What Does a Business Umbrella Insurance Policy Cover?
A commercial umbrella policy will provide additional limit for an insured’s underlying coverages which are usually the general liability, auto liability, and employers liability coverages. These liability coverages protect you against claims involving bodily injury and medical expenses or property damage as a result of your products, services, or operations, and the umbrella policy is designed to increase the limits on each underlying policy.
In addition to these coverages, umbrella policies will often cover legal costs above your existing liability. These legal costs can include attorney’s fees and damages paid to affected parties.
It is vital to remain aware of the costs that your umbrella policy will not cover, such as your personal injury or your own property damage. You will need a separate type of policy to cover these costs. Umbrella policies will also not protect you against intentional or criminal acts you commit or any liability associated with contracts you’ve entered into.
How Much Coverage Do You Need?
The best commercial umbrella insurance coverage will vary based on the business you run and the risks you face. The combined value of your general liability and umbrella coverages should typically meet or exceed the total value of your assets. This practice can reduce the risk of losing significant company value in a lawsuit.
Working with a broker or risk management consultant can help you better understand your protection needs with umbrella policies, so you can carry the right level of coverage.
How Can an Umbrella Policy Help Your Business?
An umbrella policy with a suitable amount of coverage:
- Protects your company from bankruptcy: Unexpected legal claims without the appropriate liability coverage can lead to bankruptcy for smaller businesses. Risk assessment and carrying the appropriate coverages can represent your company’s best interests.
- Saves money: While you’ll pay a premium for your umbrella policy as you do with other insurance policies, these monthly costs can be a more manageable investment compared to large liability claims. If your business is sued for bodily injury or property damage, you may have to pay millions without umbrella coverage. Even if these significant expenses don’t lead to bankruptcy, confronting these losses and keeping your company running can be challenging.
- Offers peace of mind: Your company may face a wide range of risks, and consistently mitigating them with processes and procedures may not be enough to bring peace of mind. When you have additional liability coverage with an umbrella policy, you can face claims with a greater sense of ease.
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The Difference Between Commercial Umbrella Insurance and Excess Liability Insurance
To define the difference between umbrella and excess liability, it’s essential to understand the concept of an underlying policy. Underlying policies are your company’s initial coverages to protect itself against risk. These policies will have a scope of what they protect and financial limits regarding how much your insurance provider will pay in case of a claim.
Excess liability insurance provides additional coverage above those underlying policy limits, but it does not extend the scope of what the policy covers. Excess coverage will only apply to a single policy, like your general liability coverage, which covers the same claims as general coverage and nothing more.
Umbrella coverage exceeds the limits of your underlying policy and broadens the scope of your coverage. While umbrella policies can cover claims related to bodily injury and property, they can also extend to other types of liability. For example, an umbrella policy may offer coverage against car accidents in another country — a coverage not often included in underlying policies. Additionally, umbrella insurance can extend the limits of multiple liability policies, not just one.
Get Umbrella Coverage Today
If your company faces extensive risks that general liability coverage cannot fully protect you from, an umbrella policy may be appropriate. Whether your business includes physical locations or handles hazardous materials, the right umbrella policy can mitigate the required risk. Operating abroad or traveling internationally? Coordinate foreign general liability and auto with international insurance.
Bowen, Miclette & Britt is an insurance brokerage based in Texas, Arkansas, Louisiana, and Florida. Our team specializes in identifying competitive coverages and assessing risk management needs for companies across industries. With our in-depth experience in risk mitigation and insurance, we can connect your company with an insurance provider that offers suitable umbrella coverage. For general inquiries and more information, please contact us.
