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Your Guide to Commercial Umbrella Insurance

Your Guide to Commercial Umbrella Insurance

If you already have a handful of liability policies protecting your business, you may assume you have all the coverage you need. But you never know when an unexpected claim will skyrocket past your limit, leaving you on the hook for the extra costs.

If you want peace of mind that one expensive claim won’t derail your financial future, you should consider commercial umbrella insurance. Keep reading to get answers to commonly asked questions about this essential coverage, including:

What Is Commercial Umbrella Insurance?

Commercial umbrella insurance acts as a financial safety net during large claims. If a claim exceeds the limits on certain liability policies, known as underlying policies, your umbrella insurance will kick in and help you cover the remaining costs. Without it, your business would be responsible for covering excess costs out of pocket.

What Does Umbrella Insurance Cover?

Because umbrella insurance kicks in after your general liability, commercial auto, or employer’s liability policy exhausts its limits, it typically provides coverage for the same claims. These can include:

  1. Bodily injury lawsuits

  2. Libel or slander lawsuits

  3. Property damage lawsuits

  4. Auto accidents

  5. Employee injury lawsuits

Once your primary policy reaches its coverage limit to pay lawsuit fees, settlement costs, medical bills, or property damage fees, your commercial umbrella insurance will begin to pay any remaining costs (up to a specified limit). For example, let’s say you have $1 million of coverage under your general liability policy and a $1 million umbrella limit. A customer falls in your store and suffers serious injuries that require a lengthy hospital stay, keeping them out of work for months. They sue you for $1.5 million in pain and suffering, medical costs, and lost wages and win. After your general liability policy covers $1 million, your umbrella policy will pay the remaining $500,000.

In some cases, your umbrella policy might pay for a claim that your underlying policy excludes to fill in coverage gaps. However, it’s important to keep in mind that your umbrella policy won’t pay for claims if you don’t have an existing underlying policy. If you cancel your commercial auto policy and an employee gets into a three-car accident, your umbrella policy won’t pay any of the costs.

What’s Not Covered by an Umbrella Policy?

Umbrella insurance only sits over specified liability policies, which means it won’t help pay for property insurance claims. And even though you may have other liability insurance, like cyber liability, errors and omissions, directors and officers, or dental malpractice, your commercial umbrella insurance doesn’t cover claims under those policies.

If you need additional limits for your other liability policies, you can either request to increase them or purchase excess liability policies. Excess policies are similar to umbrella insurance, but they only provide extra coverage for one underlying policy. For example, an excess cyber liability policy would only cover costs from a cyber-related claim, whereas an umbrella policy covers auto, general liability, and employer’s liability claims.

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Who Needs Umbrella Insurance?

Even if you hire the most cautious drivers, employ extra safety measures on your premises, and follow strict procedures for working on client sites, you can’t prevent every accident. If there’s a possibility that a claim could cost more than your current limits, it’s a good idea to buy commercial umbrella insurance. Umbrella insurance is especially beneficial if you:

  1. Have a lot of foot traffic at your business

  2. Work on third-party sites

  3. Sign a contract that requires higher liability limits

  4. Want an affordable way to get more coverage

Buying business umbrella insurance is usually cheaper than increasing limits individually on each underlying policy, so it’s perfect for small business owners who need more coverage but don’t want a large increase in their insurance premiums.

How Much Umbrella Insurance Do I Need?

The amount of umbrella insurance you need depends on your risk level, your current business insurance limits, and any contractual obligations you may have. An insurance agent can help you perform a risk assessment and review your contracts to identify the limit you need.

Need an expert’s help determining the right umbrella limit? Learn how Southpoint Insurance can provide expert recommendations and help protect your business.

How To Get Umbrella Insurance for Small Businesses

Getting umbrella insurance is simple with the right commercial insurance agency. After you let them know you need umbrella coverage, they’ll gather copies of your underlying policies (or ask you to provide them) and work with your company to fill out an application. Your commercial umbrella insurance doesn’t have to be from the same insurance company as your liability policies, so your representative will submit your application and gather quotes from several carriers.

If you’re unsure which option is right for your business, talk to your insurance agency. An experienced commercial umbrella insurance professional can explain the coverages and exclusions in each and help you make the best decision.

Key Takeaways

  1. Commercial umbrella insurance kicks in when you exhaust your general liability, auto, or employer’s liability limits.

  2. Umbrella insurance typically covers the same claims as your underlying policies, but it sometimes offers extra protection to fill in coverage gaps.

  3. If you exceed the limits on your property insurance or other liability policies, umbrella insurance won’t cover excess costs.

  4. Companies with significant liability risks or contractual obligations should consider umbrella insurance.

  5. Umbrella insurance usually costs less than increasing the limits on your underlying policies.

  6. The amount of coverage you need depends on your business. An insurance agency like Southpoint can help you choose a limit amount and get a policy in place.

Ready To Fill Out a Commercial Umbrella Insurance Application?

Whether you want commercial umbrella insurance for peace of mind or need a policy to meet contractual requirements, Southpoint is here to help. We use our close relationships with top insurance companies to find you the most competitive quotes at the best price. Get in touch today to start working on your commercial umbrella insurance application or learn more about how umbrella insurance protects your business.

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