Commercial general liability (CGL) insurance protects your company’s assets and pays for claims that arise when someone gets hurt on your property or when property damage or injuries are caused by you or your employees in the course of doing business. It also covers the costs of your legal defense and any judgment rendered against you should an injured party sue you.
Unfortunately, in today’s litigious society, it may not be enough. Imagine your business is named in a liability claim resulting in a $2 million settlement. You have general liability insurance, but with a $1 million limit. Where would the additional $1 million come from to pay the settlement? It would have to come from your business assets, even if you had to entirely liquidate them.
These cases may be rare, but they do happen. Consider the number of clients, suppliers, partners and other business associates that you come into contact with in the course of your daily work, and the amount of risk those relationships bring with them. Would your existing commercial insurance policies be able to protect you in every case? If you think not, you could be a good candidate for commercial umbrella insurance.
What is Commercial Umbrella Insurance?
Commercial umbrella insurance, or umbrella excess liability insurance, provides an extra layer of security for your business. If you purchase commercial umbrella insurance, it will provide protection for costs stemming from lawsuits, legal fees, court awards and out-of-court settlements that amount to more than what is covered by your general liability or other commercial liability policies.
Commercial umbrellas typically provide $1 to $5 million in excess liability coverage, and are appropriate for business owners with significant assets or who may be susceptible to lawsuits. They are considered an extra layer of protection to any of several other policies you might have, including commercial general liability, employer’s liability, and hired and non-owned auto liability. You must have these other policies in order for the commercial umbrella policy to provide supplementary coverage.
A commercial umbrella policy is considered to be the most affordable way to get higher policy limits on several other small business insurance policies, rather than raising the limits on each of the other policies individually. Commercial umbrella insurance allows you to add additional liability coverage to all of your other policies (except as noted below) through a single, affordable policy.
Take Note of Exclusions and Coverage Gaps
Even with a commercial umbrella policy, you may still have gaps in your business liability coverage. Commercial umbrellas exclude protection for errors and omissions claims, professional liability claims, product recalls, workers’ compensation claims and coverage for asbestos-related claims. In addition, commercial umbrella policies exclude coverage for claims related to pollution, wars and terrorism.
If your business could potentially face these types of claims, you need to make sure you have appropriate coverage for the following, as needed:
- Errors and omissions (E&O)/professional liability
- Employment practices liability
- Product recalls
- Workers’ compensation
- Directors and officers (D&O) liability
- Cyber liability
The amount of commercial umbrella insurance you need depends upon the type of business you own, the coverage you already have and the assets of your business.
Do you have a commercial umbrella policy as part of your overall business insurance portfolio? Might you have gaps in your commercial liability protection?