Umbrella Liability

Who Is Umbrella Liability Insurance For?

Any business that is potentially at risk of exceeding the limits of their existing liability policies should consider commercial umbrella insurance. If you provide high-level professional services or products that could potentially cause harm to a customer it’s a good idea to shore up your risk management program. Basically, the greater the risk of third-party liability claims, the greater the need for umbrella coverage.

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 businesses 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.

Also, if your company frequently works on someone else’s property, i.e. installing products for clients, construction or maintenance umbrella insurance could be a good idea.

If your business operates cars, vans, and trucks it’s also a good idea to consider a commercial umbrella policy. One bad accident can easily outcost your auto insurance and leave you exposed.

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.

If your company faces risks that exceed the limits of your current coverage, sign up to the Embroker platform to get your umbrella insurance quote in just a few minutes.

Why Do You Need It?

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 general liability, commercial auto, or workers comp 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.

How Does Commercial Umbrella Insurance Work?

Let’s break down a hypothetical scenario to illustrate where an umbrella insurance policy would fit into your risk management plan:

A customer visiting your premises has a nasty slip and fall accident. They suffer a severe injury that leaves them unable to work and decide to sue your business for damages. One long, expensive legal battle later, you end up losing the case and need to pay your lawyers, compensate the injured customer and pay for their medical expenses.

These hypothetical costs run to $1,500 000. And let’s say that your general liability policy only has a limit of $1 million. Whatever the amount is left to pay after the limit, your business will need to cover out of pocket. When liability claims go over the limit of your insurance policies, we’re typically talking about massive sums of money – high enough that they could potentially endanger your business.

However, if you have an umbrella policy in place, you don’t have to worry about this. Umbrella insurance will sit on top of your policy, in this case, general liability insurance, and pay for the expenses that exceed the limits of the underlying policy, saving your business from a huge payout.

What’s Not Covered?

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 & omissions (E&O) insurance. Umbrella insurance will not cover any claims related to this type of professional liability policy.

What Does Commercial Umbrella Insurance Cost?

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.

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. 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 that while your 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 most. For more, read our full guide on commercial umbrella insurance cost.