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What Is Commercial Umbrella Insurance?

Looking up at the sky between 3 skyscrapers

It's never easy to predict if something bad is going to happen to your business. However, that doesn't mean you can't take extra steps to protect yourself and your company if the unexpected does occur.

That's where commercial umbrella insurance can help. If you've been thinking about adding an additional layer of security to your current liability insurance coverage, commercial umbrella insurance might be a smart option to explore.

Why Add Commercial Umbrella Insurance?

Many businesses have insurance coverage to help protect against lawsuits and damage claims. Some of the most common include:

  • General liability insurance, which helps cover claims of bodily or property damage caused by your products, services or employees.
  • Commercial auto insurance, which helps cover vehicles used by your company or employees
  • Employer's liability coverage, which helps cover job-related illnesses or injuries to employees that aren't covered by workers' compensation insurance.

Commercial umbrella insurance can act as another layer of protection on top of these insurance policies. It can help cover the costs associated with legal fees, damages and medical expenses, up to your limit.

Umbrella insurance can be used as a way to increase coverage amount by providing higher limits, and it can also fill in some of the gaps in your current policy coverage.

What Is Covered Under a Commercial Umbrella Insurance Policy?

Before you explore any umbrella insurance policy, it's important to remember that you'll need the underlying coverage first. That means if you want a higher policy limit on your commercial auto insurance, you will need to already own that type of policy. Typically, a good rule of thumb is you can't get an umbrella policy for a type of coverage if you don't have that policy in the first place.

In many cases umbrella coverage may increase your existing coverage up to a new limit. This can come in handy if your business is hit with a lawsuit that goes beyond your current liability coverage—otherwise, you might have to pay those additional costs out of pocket.

Here's just one example of how a commercial umbrella policy can work:

Your client came into your office for a meeting, but on the way they slip and fall, injuring their back. Now they are out of work for the foreseeable future. They sue you for $1.5 million in damages. However, your current general liability policy only has coverage up to $1 million.

Without an umbrella policy, you might be on the hook for that additional $500,000 over your coverage. If you have an umbrella policy that extends your coverage limit to $2 million, for instance, then that policy could help make up the difference.

Depending on the type of umbrella coverage you have, combined with your other policies, you might even have your legal fees covered, as well.

Choosing the Right Commercial Umbrella Insurance

When deciding about umbrella coverage, take the time to explore your options and have a close look at the policies available to you. Coverage for an aircraft or watercraft might not be included in some commercial umbrella policies, for example.

If you have particular needs in coverage or limit requirements, make sure your umbrella policy covers them. Some policies don't extend particular types of liability coverage or may require you to have specific coverage amounts. If you have questions, don't hesitate to ask your insurance agent.

The costs of paying for damages, medical fees or lawsuits can add up—having an umbrella policy is one way you can help safeguard your business from the unexpected.