What is commercial umbrella insurance?

Like a sudden thunderstorm, costly business lawsuits or accidents can come out of nowhere. According to Consumer Shield, the number of court cases filed in the United States reached 65.5 million in 2022. Without adequate additional coverage, even if your business has commercial insurance, you could be left vulnerable to financial loss. 

Commercial umbrella insurance is a type of coverage that can provide an additional layer of liability protection beyond your general liability coverage. Infinity Insurance Agency Inc., (IIA) recognizes the importance of proper commercial coverage. While we may not provide this specific coverage, commercial umbrella insurance coverage can be a valuable tool in your toolbox that complements your existing liability coverage.

Understanding commercial umbrella insurance

So how does umbrella liability insurance differ from general liability insurance? General liability insurance provides standard coverage from third-party claims related to bodily injury, property damage, and personal injury. Commercial umbrella insurance is an additional type of liability insurance that works to provide coverage when you go over your established liability insurance limit.  

Umbrella insurance can be added onto existing commercial coverages such as:

• General liability insurance
• Commercial car insurance
• Hired and non-owned auto liability insurance
• And employment practices liability insurance

This type of coverage can potentially cover costs associated with legal expenses, medical bills, damage to someone else’s property, and court judgments and settlements. Just like an umbrella, this supplemental policy can offer a wider network of coverage that may shield you from the raining cost of a large claim against your business.

How does commercial umbrella insurance work?

Wondering how commercial umbrella insurance works? Before your commercial umbrella coverage can kick in, the limits of your primary liability policy much first be exceeded.

Pretend your business has commercial general liability insurance and a customer slip and falls on your business’s premises. Due to their injuries the customer could decide to file a claim against your policy. If the customer’s claim was denied, they could proceed with a lawsuit against your business. If this customer sues your business for $1.5 million and you only have $1 million in general liability coverage, your commercial umbrella insurance policy could potentially make up the $500,000 not covered by your general liability coverage policy’s limits. Umbrella insurance may potentially save you from incurring significant costs resulting from situations or accidents in which you are legally at fault. 

However, it is important to note that umbrella coverage does not only provide coverage for lawsuits. A business owner can request commercial umbrella insurance without filing a lawsuit or receiving a claim against their company. Commercial umbrella insurance may be obtained to mitigate financial loss in case someone files a claim against your business.  

What types of risks does commercial umbrella insurance cover?

Typically, commercial umbrella insurance will cover claims associated with third-party bodily injuries, property damage, legal fees, and settlement costs. For example, commercial umbrella insurance would likely provide coverage if your business was battling a defamation lawsuit for $2 million if that amount exceeds your commercial general liability policy.  

Umbrella policies cannot offer coverage for every type of ‘rain.’ Some common limitations or exclusions for commercial umbrella insurance can include situations involving:

• Worker’s compensation
• Employer’s liability and employment-related practices
• Pollution
• Liquor liability
• Aircraft, watercraft, or racing activities
• Electronic data
• Recall of products/work
• Impaired property

Who can benefit from commercial umbrella insurance?

Many industries can benefit from the additional coverage provided by business umbrella liability insurance. Industries that commonly utilize umbrella insurance include construction, retail, hospitality, and manufacturing. If you believe your business is vulnerable to lawsuits, or work in an industry that relies on frequent client and customer interaction, umbrella insurance could be worth looking into. Businesses that operate heavy equipment or conduct business on someone else's property generally have a greater liability risk and could benefit from a commercial umbrella insurance policy. Business owners should carefully consider their industry, business size, risk exposure, and risk tolerance to determine if they wish to pursue umbrella coverage.  

Key benefits of commercial umbrella insurance

Unfortunately, in today’s litigious society, it only takes one lawsuit to destroy your business. Commercial umbrella insurance can provide coverage for the business and assets that you worked so hard to build. An additional umbrella policy can offer financial protection against large claims, and cover gaps in primary policies. Many business owners see commercial umbrella insurance as a ‘cushion’ to lessen the likelihood of complete financial loss.

Typical business umbrella coverage limits

Depending on the risks associated with your industry, you may require a policy with aggregate limits ranging from $1 to $15 million. Typically umbrella policy limits are sold in increments of $1 million. According to Insureon, commercial umbrella insurance tends to cost about $40 per month for each $1 million of additional insurance coverage. To determine a suitable amount of coverage for your business you should speak with your insurance agent.  

After working tirelessly to make your business a success, why leave yourself vulnerable to financial loss? In combination with your existing commercial general liability policy, commercial umbrella insurance may provide you with crucial coverage in case of a worst-case scenario.  

Interested in learning more about our commercial general liability coverage? Reach out to an IIA agent today to receive a free quote at 1-855-478-3705.