What is Commercial Umbrella Insurance?

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Commercial umbrella insurance, also known as business umbrella insurance, is an insurance policy that offers an additional level of liability protection by contributing and bearing the cost that surpasses your other liability coverage limits. This means that this type of insurance compensates your other liability coverages by handling things when your liability coverage limits have gone beyond them.

What is Commercial Umbrella Insurance?

Apart from this, if you have a small business and already have a small business insurance policy, do not expect to get extra protection and cushion if the liability insurance in your base policy becomes short of supply or inadequate. But with a commercial umbrella insurance policy, that extra cushion that you need will be provided.

For example, your business is required to make additional payments when your employee was making a delivery and got involved in a car crash that led to injuries, and the medical expenses exceeded your commercial car insurance liability limit.

If you are in a situation like this, you are going to have a lot of out-of-pocket expenses. However, with commercial umbrella insurance, why do you have to worry when the excess amount will be taken care of?

How Does It Work?

Take, for instance, one of your employees who gets involved in a car accident with the company’s car while making deliveries and is responsible for the collision. Sadly, the cost of damages and the other party’s medical bills surpass or exceed your current commercial car policy coverage limit. If you are in a situation like this, you can include commercial umbrella insurance in your existing policy.

All those additional amounts and expenses will be covered. Unfortunately, without this type of insurance policy, you will be in charge of making up for the extra payments, which will result in out-of-pocket payments.

Even though this type of insurance quote is only used for prolonging and extending coverage limits for property damage claims and third-party bodily injury, other coverages are not applied. For example, cyber liability insurance, professional liability, and commercial property.

What Does Commercial Umbrella Insurance Cover?

Generally, the cost of liability claims that exceed the limits of an existing quote is covered by commercial umbrella insurance. It can be a commercial auto insurance policy or a general liability policy. Accordingly, this insurance type covers medical bills, court judgments and settlements, legal expenses, and damage to the property of a third party.

Additional coverage offered by commercial umbrella insurance includes:

  • Third-party property damage.
  • Employee injury lawsuits.
  • Slip-and-fall injuries.
  • Product liability.
  • Car accident liability.
  • Reputation damage.

So, you can include these in your policy when you are purchasing a quote to receive coverage.

What is Not Covered by Business Umbrella Insurance?

Not all insurance claims are covered by commercial umbrella insurance. On the other hand, the inclusions and exclusions of a quote depend on the insurance company as well. For instance, commercial property insurance is not included in this umbrella policy.

Any event that is not part of your policy will not be covered. Additionally, situations based on errors and omissions are not covered by business umbrella insurance.

How Much Does Commercial Umbrella Insurance Cost?

The average cost of getting commercial umbrella insurance will be around $40 per month. If you would like additional insurance coverage, this is about $1 million. Other factors that affect business umbrella insurance costs include:

  • Number of vehicles.
  • Industry and risk.
  • Number of employees.
  • Coverage limits.

How Much Business Umbrella Insurance Do I Need?

Determining how much business umbrella insurance you need depends on various factors. This includes the size and nature of your business, the level of risk involved in your operations, and your existing liability coverage. A good starting point is to assess your current liability coverage limits. Then you can consider potential risks that may exceed those limits.

For instance, if you have general liability insurance with a limit of $1 million but face risks that could result in a lawsuit with damages exceeding that amount, you might consider purchasing a business umbrella policy to provide additional coverage.

It’s advisable to consult with an insurance agent or risk management professional who can assess your specific situation and recommend an appropriate amount of coverage. They can help you understand your potential liabilities and determine the level of protection needed to safeguard your business assets.

Additionally, regularly reviewing your insurance coverage and adjusting it as your business grows or changes is essential to ensuring adequate protection.

How to Get Commercial Umbrella Insurance

It is said that the best commercial umbrella insurance policy is the one you tailor-make to meet your needs and requirements. So, if you are considering this type of insurance, that is a choice that you will not regret. Moreover, before purchasing an umbrella policy for your business, you need to make sure that you will get the best coverage and price.

  • Choose coverage limits.
  • Prepare all the necessary information and documents.
  • Begin shopping for the best umbrella insurance companies.
  • Get recommendations and read reviews.
  • Compare multiple policies.
  • Ask for discounts to save money.

You can even customize your business umbrella insurance policy depending on how much coverage you need.

FAQs

Can I purchase commercial umbrella insurance as a standalone policy?

In most cases, business umbrella insurance is purchased as an add-on to your existing liability insurance policies. It extends the coverage limits of those policies rather than being a standalone policy. However, some insurers may offer standalone umbrella policies, depending on your business needs.

Do I still need business umbrella insurance if I have other liability coverage?

Even if you have other liability coverage, such as general liability or commercial auto liability insurance, a commercial umbrella policy can provide an extra layer of protection against large claims or lawsuits that exceed the limits of your primary policies.

How do I know if I need business umbrella insurance?

If your business faces significant risks or operates in an industry where large liability claims are common, it’s wise to consider purchasing commercial umbrella insurance. Consulting with an insurance professional can help you evaluate your risk exposure and determine if additional coverage is necessary.