Do I Need Commercial Umbrella Insurance?

Lucy Lazarony
June 2, 2020

Do you need more insurance coverage than you are getting with your current commercial policy? Wondering if you need a commercial umbrella insurance for your business?

Buying commercial umbrella insurance can be a good back-up plan for your commercial insurance policy. It will ensure that you have enough coverage and won’t need to pay out-of-pocket for losses or lawsuits.

But let’s begin by looking at commercial insurance and see what is covered there and then we will dive into commercial umbrella insurance coverage basics.

Commercial Insurance

Commercial insurance is insurance that protects businesses. Commercial insurance covers businesses against losses such as property damage or injury to company employees. It also covers public liability and employer’s liability.

The common types of commercial insurance most businesses have are property, liability and workers’ compensation.

Property insurance covers damage to the business property. Liability insurance covers damage to third parties. And workers compensation covers employee injuries that happen on the job.

Do you need more coverage than your current commercial policy gives? Let’s take a look at where commercial umbrella insurance coverage can add an extra layer of protection to the coverage you already have.

What Is a Commercial Umbrella Policy?

Just what does commercial umbrella insurance cover? A commercial umbrella insurance policy extends your liability protection by covering costs that go beyond the coverage limits of your original commercial insurance policy.

In other words, when an underlying liability insurance policy reaches its coverage limits, the commercial umbrella policy kicks in with additional liability protection. Let’s say you had a coverage limit of $100,000 on your general liability coverage and you had a legal battle that ended up costing you $150,000. Your general liability coverage would cover $100,000 and you’d look to your commercial policy for the additional $50,000. Otherwise, you’d pay out-of-pocket.

What do you get in the additional liability protection? A commercial umbrella policy covers attorney fees, medical expenses and damages if your company should face a lawsuit.

How Much Does a Commercial Umbrella Insurance Policy Cost?

A commercial umbrella insurance policy with a $1 million in coverage can cost as little as a few hundred dollars a year. A $1 million commercial umbrella insurance policy is the minimum coverage that you can buy. Two million dollar, even $4 million, policies are available to businesses with greater liability needs.

Let’s say your business is found liable for a customer’s injury at your business and you are sued for $2 million but you have $1 million in commercial liability protection. Having $1 million in commercial umbrella liability insurance would make up the difference. Otherwise, you would need to pay out of your own pocket or face bankruptcy. You might even need to close your business, which is why a commercial umbrella policy is so important.

Commercial General Liability Insurance v. Umbrella Policy

Having an umbrella policy in addition to a commercial general liability insurance gives you an extra layer of liability protection. As noted above, $1 million dollar commercial umbrella policy can protect your business at the time of a big lawsuit. So re-assess your commercial policy and see if you could use the additional protection.

Buying a commercial umbrella insurance coverage is often cheaper than increasing the limits on your commercial liability coverage. So consider both choices carefully. If you need additional liability protection and are on a budget, a commercial umbrella insurance coverage may be the way to go.

Not a Stand-alone Coverage

Check out commercial umbrella insurance rates when you buy general liability insurance or a business owner policy. Commercial umbrella insurance policies are not stand-alone policies. They work in conjunction with your other liability coverages. When you compare commercial insurance rates, see what kind of deal they can offer you on commercial umbrella insurance. If they want your business, they will offer you a good deal.

Shop Around for the Best Commercial Insurance Rates

But you will want to check out more than your own insurance provider. As with any insurance product, you will want to shop around for the best price for commercial insurance. So start with your current insurance company and then shop around to see what other deals another insurance company may offer on a commercial umbrella coverage. You never know what a good deal you will find until you shop around. And if the best deal turns out to be with your current insurance provider, that’s great too. But at least you shopped around to check.

The cost of your commercial umbrella insurance coverage depends on your amount of underlying liability coverage, your type of business and your business size. Some industries are higher risk than others and this will increase the cost of the commercial umbrella insurance coverage.

Health care companies and construction companies are two examples of higher risk companies. If your business falls into these categories you may pay a little more for their commercial umbrella insurance coverage.

But the primary factor determining the cost of commercial umbrella insurance is the amount of coverage you buy. A $2 million dollar policy would cost more than a $1 million policy, which makes sense. So choose a policy that gives you the coverage that you need but also meets your budget. Remember this is additional coverage on top of your commercial liability policy. They work together to give you liability protection for your business.

Who Needs a Commercial Umbrella Policy?

Not sure if a commercial umbrella policy is right for your business? It all depends on your liability risk.

If you are in a business that interacts with clients and customers, the greater your liability risk is likely to be. And if your business has heavy or dangerous equipment, your liability risk is higher as well. Here are three more instances. If in your business you frequently interact with others, work on someone else’s property and/or if your business is open for the public to visit, you have increased liability.

Businesses with higher liability risks are good candidates for commercial umbrella insurance policies. Commercial umbrella insurance policies would help cover the cost of lawsuits, medical expenses and judgments against your business. Compare rates with reputable insurers by entering your zip code below.

In addition, commercial umbrella insurance policies can protect your business from libel, reputational damage, vehicular accidents, product liability and customer injury.

An umbrella policy can be placed above a general liability policy, a commercial auto policy or workers’ compensation. Once the underlying policy reaches its coverage limits, the commercial umbrella insurance policy kicks in.

A commercial umbrella insurance policy can be a good added liability protection for your business. Choose the coverage and the insurance provider that is right for you. And enjoy the added liability protection for your business.

Get a Free Commercial Insurance Quote.

Related Articles

Commercial Insurance Commercial Auto Insurance for Realtors

Do you do a lot of driving for your real estate business? Do you drive around town showing clients your listings? Commercial auto insurance may be the best insurance choice for you.

Commercial Insurance Commercial Boat Insurance

Commercial boat insurance protects your boat and covers your liability if something goes wrong. How much commercial boat insurance do you need? Let us help you decide.

Looking for Commercial Insurance?

Compare rates from dozens of companies in less than 3 minutes.