What is Commercial Umbrella Insurance and How Does it Protect Your Business?

Commercial umbrella insurance is supplementary liability insurance that protects your business from the costs associated with lawsuits, legal fees and settlements. It is also referred to as excess liability insurance, and it is appropriate for any business that faces liability exposures.

You might think that you have sufficient commercial liability coverage under your general liability policy. And while these policies do provide broad coverage, you may still need a commercial umbrella. You and your employees come into contact with numerous clients, suppliers, partners and other business associates every day, and every one of those relationships and contacts comes with a certain degree of risk. Do you think your commercial general liability (GGL) policy would provide enough coverage in every potential circumstance? What if you were named in a lawsuit and required to pay out more than the amount of coverage you have under your CGL policy? Where would the additional funds come from to pay the settlement? Would you have to liquidate all of your business assets and be forced out of business?

Commercial umbrella insurance is an easy answer to all of these uncertainties. Its sole purpose is to provide an extra layer of liability protection to any of several other policies you might have, including commercial general liability, employer’s liability, and hired and non-owned auto liability. By purchasing one commercial umbrella policy, you essentially get higher limits on all of those policies, rather than having to raise the limits on each policy individually. You get broad protection at an affordable price!

Commercial umbrella insurance kicks in when the limits of your other applicable insurance policies have been exhausted. Depending upon the type of business you own and the business assets you need to protect, a commercial umbrella policy can provide from $1 to $5 million in excess liability coverage. But be mindful of certain exclusions. Commercial umbrella policies will not cover errors and omissions claims, professional liability claims, product recalls, workers’ compensation claims, asbestoses-related claims, and any claims related to pollution, war and terrorism.

Do think you might need commercial umbrella insurance as part of your complete business insurance portfolio? Do you think your existing liability coverage is sufficient? Why or why not?