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A robust small business insurance policy handles unexpected events and provides extra cushioning if your base policy’s liability insurance is inadequate. Commercial umbrella insurance offers this additional cushion.
For example, suppose your employee is involved in a car accident while making deliveries, and the medical costs exceed your commercial auto insurance liability limits. In that case, your business must cover the excess. However, the policy would cover the additional costs with commercial umbrella insurance.
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What Is Commercial Umbrella Insurance?
Commercial umbrella insurance adds an extra layer of liability protection for your business. It activates when a claim surpasses the liability limit of a foundational insurance policy, like commercial general liability insurance, providing further liability coverage.
What Does Commercial Umbrella Insurance Cover?
Commercial umbrella insurance helps pay for liability claims that exceed the limits of an underlying policy, such as a general liability or commercial auto insurance policy.
It covers legal fees, medical bills, property damage, and court judgments and settlements. Insurers typically offer commercial umbrella policies with aggregate limits from $1 million to $15 million.
What Is Not Covered By Commercial Umbrella Insurance?
Commercial umbrella insurance doesn’t cover every type of claim. For instance, it doesn’t extend to commercial property insurance policies.
If a fire damages business equipment, you’d need to use your commercial property insurance for repairs without the help of a commercial umbrella insurance policy.
How Does a Commercial Umbrella Insurance Policy Work?
Imagine your company is sued for $2 million but only has $1.5 million in business liability coverage. Your liability insurance would cover up to the policy limit, leaving a $500,000 shortfall.
Without a commercial umbrella policy, you’d have to cover the $500,000 with your business or personal funds, risking your business’s or personal financial stability.
A commercial umbrella policy would cover the $500,000 excess, ensuring you’re in pocket for these costs.
Who Needs Commercial Umbrella Insurance?
Businesses that interact frequently with clients and customers or use heavy or dangerous equipment are at higher liability risk. Extending their liability limits with commercial umbrella insurance would benefit these businesses.
This also applies to businesses operating on someone else’s property or open to the public during working hours. The risk of bodily injury claims and property damage makes a strong case for extra liability protection with a commercial umbrella policy.
How Much Commercial Umbrella Insurance Do I Need?
The required amount of commercial umbrella coverage depends on the common risks in your industry. Policies are usually available in increments of $1 million, with limits ranging from $1 million to $15 million.
For instance, a high-end jewelry store’s needs differ from those of a business with a delivery fleet or a construction team. Consult your insurance agent to determine the right coverage amount for your business.
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How Much Does Commercial Umbrella Insurance Cost?
According to Insureon, commercial umbrella insurance costs roughly $40 per month for every $1 million of additional coverage.
Your coverage amount and business risk level determine the cost of your commercial umbrella policy. Some small businesses (29%) spend less than $50 a month on commercial umbrella insurance, while 32% spend between $50 and $100 a month, per Insureon.
Paying your premium upfront can save money on a commercial umbrella policy. Monthly payments may be convenient but result in a higher overall annual cost. Consider paying your commercial umbrella policy in full.
When Can You Add Commercial Umbrella Insurance?
Which types of liability insurance could benefit from the added layer of commercial umbrella insurance? General liability insurance, commercial auto insurance, hired and non-owned auto insurance, and employer’s liability insurance are prime candidates.
General Liability Insurance
General liability insurance shields your business from various claims, including bodily injury and property damage from clients and customers. It also covers claims such as copyright infringement, reputational harm, and advertising injury.
Commercial Auto Insurance
Commercial auto insurance covers the cars, trucks, and vans used in your business operations. Personal auto insurance policies typically exclude business vehicle usage, making it crucial to secure liability coverage through a commercial auto policy.
Hired and Non-Owned Auto Liability Insurance
Hired and non-owned auto liability insurance offers coverage for employees renting or using their personal vehicles for business purposes. Since personal insurance policies do not cover business-related driving, acquiring hired and non-owned auto liability insurance is essential for renting cars for work or using personal vehicles for business tasks.
Employment Practices Liability Insurance
Employment practices liability insurance protects against lawsuits filed by your employees against your company.
What’s the Difference Between Commercial Umbrella Insurance and Excess Liability Insurance?
Excess liability insurance provides additional liability coverage for one of your underlying liability policies. Like commercial umbrella insurance, excess liability insurance activates when an underlying insurance policy reaches its liability limits, offering extra liability protection.
However, excess liability insurance extends coverage only to a single underlying policy, like a general liability insurance policy.
Conversely, a commercial umbrella insurance policy can provide extra coverage across several liability insurance policies.
Commercial Liability Insurance Options
In addition to commercial umbrella insurance, several other endorsements might suit your business needs, including:
- Hired and non-owned auto liability insurance offers auto liability coverage when employees use their cars or rent vehicles for business purposes.
- Employment practices liability insurance, which protects against lawsuits from employees.
- Directors’ and officers’ liability insurance covers defense costs and damages arising from claims against a director or officer.
- Liquor liability insurance safeguards you from injury claims related to alcohol served during business operations.
- Fire legal liability insurance covers you if you are held liable for a fire in a rented or leased space.
Best Insurance Companies for Your Business
NEXT
Overall Best General Liability Insurance
- Quickly get a quote and purchase a policy online
- Access and share your certificate of insurance digitally
- Clear pricing details
- Lacks specialized coverage options like key person insurance or directors and officers insurance
NEXT’s general liability insurance swiftly resolves damage claims. Often, an insurance adjuster evaluates damages and decides within two days of the complaint.
If you share information about your LLC with Next, the company can identify necessary policies and provide a quote within minutes. Purchases can be completed online, though insurance agent assistance is available. Your certificate of insurance is accessible online for easy sharing.
Hiscox
Best for Premium Deductibles Rate
- Professional liability policies cover work globally
- Industry-specific packages simplify coverage selection for business owners
- Online quotes and purchasing for general liability policies are available
- Hiscox business owner’s policies are only available in some states
Hiscox stands out for its competitive pricing and comprehensive coverage. Its affordable premiums allow for budget-friendly resource allocation while ensuring necessary coverage. General liability insurance covers bodily injury, property damage, and personal injury claims.
The Hartford Business Insurance
Best for Customer Support
- Above-average customer satisfaction ratings for auto insurance shopping
- Free benefits like new car replacement are included with AARP auto insurance policies
- Higher than expected number of complaints for auto insurance policies
Hartford is known for its comprehensive business insurance coverage tailored to various business sizes. Their user-friendly online portal facilitates quotes, policy changes, insurance certificates, and claims tracking.
Claims can be filed online without an account, and while small businesses can start the quote process online, they may need agent assistance to complete it. Hartford offers several ways to get started, including direct contact, a contact form, or connecting with a local independent agent.
Chubb
Best for Competitive Rates
- Purchase business owner’s policy, general liability insurance, professional liability insurance, and other standard coverages online
- BOPs include extra expense coverage, not always standard
- Insurance certificates must be requested through an online portal
Chubb’s insurance policies cover a range of areas, including property, casualty, liability, and specialty lines, offering comprehensive risk protection. Their customizable solutions allow clients to tailor insurance plans to their specific needs.
Chubb provides a straightforward package of insurance options for small business owners online. Their business owner’s policy combines general liability insurance with business property and business interruption insurance. It also includes extra expenses and accounts receivable coverage, which aren’t always part of standard BOPs.
Choosing Liability Policies for a Small Business
General liability insurance and commercial auto insurance are popular among small businesses. Additionally, you might want to explore these extra liability insurance options:
Directors and Officers Liability Insurance
This insurance covers defense costs and damages for claims against a company’s officer or director.
Fire Legal Liability Insurance
This insurance provides coverage if you are found liable for a fire in a space you rent or lease.
Liquor Liability Insurance
Liquor liability insurance protects businesses against injury claims when alcohol is served during business operations. This is an excellent option for restaurants and bars.
Five Reasons Why Your Business May Need Umbrella Insurance
1. Risk of Bankruptcy: With it, particularly in litigation-prone industries, one large jury award exceeding your policy limits could help your business.
2. Customer Requirements: Customers want assurance that your business has adequate coverage to handle accidents.
3. Inherent Business Risks: Your business may manufacture hazardous materials or have a high risk of occupational injuries to employees.
4. Vehicle Liability: Owning company vehicles or having employees use their personal cars for business brings liability with every mile.
5. Physical Presence Risks: A single slip, fall, or other accident on company property could lead to significant liabilities.
Ensure your business is prepared for that rainy day with the right coverage.
What Is an Umbrella Insurance for Business? – FAQs
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What Is an Umbrella Insurance for Business – Final Thoughts
Umbrella insurance for businesses acts as an essential safety net by adding an extra layer of liability protection beyond standard policies’ limits. This insurance is precious for businesses with extensive public interaction or significant assets vulnerable to lawsuits.
By covering claims that exceed the limits of other policies, umbrella insurance ensures that a single major claim doesn’t threaten your business’s financial stability. Given its broad coverage and relatively low-cost relative to the protection it offers, umbrella insurance is a prudent choice for businesses aiming for comprehensive risk management.
